Bear vs Bull Market: Here’s The Difference And What To Know

In other words, small movements represent only a short-term trend or a market correction, and it’s a longer time period that would actually determine the nature of the market. Bull markets generally coincide with periods of robust economic growth; investor confidence is on the rise, employment levels are generally high, and the economic production is strong. The term “bull vs. bear” denotes the ensuing trends in stock markets – whether they are appreciating or depreciating in value – and what is the investors’ outlook about the market in general. In a perfect world, you could predict when the market would turn so that you could capture all the gains of bull markets and suffer none of the losses of bear markets. In the real world, the best bet is usually to hold on through ups and downs.

This type of market encourages buying, as the conditions are favourable. The basic features of such a market are optimism, higher returns, https://www.bigshotrading.info/ high stock trading and investor confidence. Further, the forecasting of market trends is a bit difficult, i.e. when they will be changed.

Why is it Called a Bear Market?

The average bear market has lasted 1.3 years, with average losses of 36%. The average bull market has lasted 6.6 years, with the market returning an average of 339%. Sometimes, you might also hear that an expert is “bullish” on the market or “bullish” on some particular stock. That just means that person thinks the market or that particular stock is likely to go up. The first gold bull market occurred in the 1970s when Nixon ended the gold standard, and the price went from a mere $35 to a whopping $850. Bear market – substantial decline over a sustained period of time. But shortly thereafter it began to fluctuate, with the Nasdaq entering a bear market in April and the S&P 500 following in June.

The benchmark fell 37.8% until it hit its bottom of 7,286.27 on October 9, 2002. This bear market triggered the 2001 recession, compounded by the 9/11 terrorist attacks, which shut down stock exchanges and shocked the world. One factor that contributed to this bear market was the decision by President Richard Nixon to end the gold standard, which was followed by a period of inflation.

Difference between a bull market and bear market

Kirsten is also the founder and director of Your Best Edit; find her on LinkedIn and Facebook. On the flip side, most people will likely have more disposable income for guilt-free spending in a bull market, increasing their willingness to spend it. This behavior can help businesses thrive and therefore strengthen the economy. During the bearish phase, companies begin laying off workers, leading to a rise in unemployment and consequently, an economic downturn. During the bearish phase, companies begin laying off workers, leading to a rise in unemployment and, consequently, an economic downturn.

People who want to benefit from a bull market have to catch on early. Investors should Bull and Bear Market: Definition & Difference buy at the beginning of a bull market cycle to take full advantage of rising prices.

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Aside from the numbers, a bear market is also characterised by investors’ pessimistic outlook on the economy and the lack of confidence in the markets. In general, investors are extra cautious with their money during a bear market, as no one is certain when or if a bear market will end. A bear market is defined as a market condition in which asset prices have declined 20% or more from their recent highs. Despite this threshold, the average bear market since 1929 has actually recorded declines from 30% to 40%. ” the answer is yes, according to traditional benchmarks and technical analysis. In traditional finance , the term ‘bull market’ is believed to have originated from a bull’s fighting style of thrusting its horns in an upward motion.

But most experts agree if the fall is 20% or more, it’s a bear market. When that happens, people get scared and either stop investing in the market altogether or panic sell and pull all their money out. Just like the economy and job growth simulates a bull market, a bear market is spurred by the opposite. Stock market experts consider falls of 20% or more over the course of two months or more to be a bear market. They usually use the S&P 500 as a guide to determine whether the overall market is bullish or bearish.