Bull Market Versus Bear Market

A bear market occurs when a market’s price decreases over an extended period of time. It usually refers to a situation when stock values have fallen 20% or more from recent highs due to widespread pessimism and poor market sentiment.

Bear Market Features

Individual assets or commodities can be deemed in a bear market if they lose 20% or more over a prolonged period of time — two months or more. Bear markets can also occur in conjunction with broader economic downturns, such as a recession. Bear markets is compared with bull markets that are heading higher.

In general, stock prices represent future prospects of cash flows and earnings from listed businesses. Stock prices might fall if growth prospects fade and hopes are shattered. Long periods of weak asset prices can be caused by herd behaviour, anxiety, and a rush to protect negative losses.

The most common cause of a bear market is investor anxiety or uncertainty, but there are a variety of other factors at play. While the most recent 2020 bad market was triggered by the worldwide COVID-19 epidemic, other historical reasons include extensive investor speculation, reckless lending, oil price fluctuations, too much investing, and more.

Know More: India’s Bullish and Bearish Market Trends

Markets are in bear territory, as mentioned before, when equities have fallen by at least 20% from their peak. However, just as a 10% loss is an artificial baseline for a correction, 20% is an arbitrary amount. A bear market is also defined as a period in which investors are less risk-seeking. This type of bear market can linger for months or even years as investors avoid risky investments in favour of safe bets.

Bull Market Features

The bull market is the polar opposite of the bear market. Bull markets occur when stock values climb steadily, and they are often accompanied by high consumer confidence, low unemployment, and robust economic development.

A bull market is a situation in which prices are increasing or are projected to rise in a financial market. The word “bull market” is most commonly associated with the stock market, although it may also refer to any tradable asset, including bonds, real estate, commodities, and minerals.

Because security prices increase and fall almost continually throughout trading, the phrase “bull market” is usually reserved for lengthy periods during which a significant share of security prices is rising. Bull markets may endure months, if not years, at a time.

A bull market is often described as a 20% increase from the lows achieved in a bear market, although the definition isn’t as comprehensible as a bear markets’. Typically, investors designate the beginning of a bull market at the bottom of a bear market. The BSE, for example, reached the financial crisis’ lows in July 2009, marking the start of a bull market that lasted until December 2014.

Bull markets are characterised by high levels of optimism, investor confidence, and hopes that great performance will continue for a long time. It’s tough to foresee when market trends will shift on a constant basis. Part of the problem is that psychological factors and expectation may sometimes have a significant impact on the markets.

Bull Trader and Bear Trader

The stock traders of both the markets are given names accordingly. A bull trader, in stock-market lingo, is someone who buys stocks or commodities in the hopes of a price increase, or someone who causes such a price rise to occur. A bear trader does completely opposite, sells assets or commodities in anticipation of a price drop.

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