Bull Versus Bear Market

A bull market is defined by a persistent increase in price, whereas a bear market is defined by sustained periods of declining stock prices — generally by 20% or more. The terms and the message they give away are essentially from the animals themselves. A bull will usually attack by thrusting its horns in the air, whereas a bear will attack when in fear. Therefore, if the market trend is going upwards, it is a bull market, and if it’s going downwards, it is a bear market.

The Phases:

The two markets we previously discussed consist of four phases. Expansion, peak, contraction, and trough.

The Differences:

A bull market is when investors believe that prices will begin to climb and then continue to rise, they tend to buy and retain stocks in the hope that they are correct. The investor’s assumptions about the market impact the prices themselves.

A bear market on the other hand is when the investor losses confidence and eventually collapse. They create a downward spiral because they believe that prices will continue to fall. Bear markets usually don’t last long.

These terms don’t necessarily relate to the specific event but rather to the long-term state of the market. Small movements don’t determine the nature of the market.

Bull markets are typically associated with periods of strong economic growth; investor confidence is rising, employment levels are high, and the economy is strong. While during the bearish phase there’s an economic downturn and a rise in unemployment.

What effects a bull and bear market?

1. Supply and demand
2. Changes in economic activities
3. Investors’ psychology