JUN 2, 2020 By : ATHUL RAJEEV, VENTESKRAFT.
BULL MARKETS AND BEAR MARKETS
In this blog we will go through about bull and bear markets. Almost every day in the investing world, you will hear the terms “Bulls” and “Bears” used to describe market conditions.The terms “bull market” and “bear market” describe upward and downward market trends. It can be used to describe either the market as a whole or specific sectors and securities. The names perhaps correspond to the fact that a bull attacks by lifting its horns upward. While a bear strikes with its claws in a downward motion. Because the direction of the market is a major force affecting your portfolio.
It’s important that you know exactly what the terms signify and how each affects you.A bull market is a market that is on the rise and where the economy is sound. While a bear market exists in an economy that is receding, where most stocks are declining in value.Although some investors can be “bearish,” the majority of investors are typically “bullish.” The stock market, as a whole, has tended to post positive returns over long time horizons.A bear market can be more dangerous to invest in, as many equities lose value and prices become volatile.Since it is hard to time a market bottom, investors may withdraw their money from a bear market and sit on cash until the trend reverses, further sending prices lower.
What Are Bear and Bull Markets?
The terms bull and bear market are used to describe how stock markets are doing that is, whether they are appreciating or depreciating in value. At the same time, because the market is determined by investors’ attitudes, these terms also denote how investors feel about the market and the ensuing trends.Simply put, a bull market refers to a market that is on the rise. It is typified by a sustained increase in price, for example in equity markets in the prices of companies’ shares. In such times, investors often have faith that the uptrend will continue over the long term. Typically the country’s economy is strong and employment levels are high.
A bear market is one that is decline. Typically having fallen 20% or more from recent highs. Share prices are continuously dropping, resulting in a downward trend. That investors believe will continue, which in turn perpetuates the downward spiral. During a bear market, the economy will typically slow down and unemployment will rise as companies begin laying off workers.
What Causes a Bull Market?
Though a wide range of different factors contributes to a bull market, the two largest are usually
- A strong economy
- High employment levels across the board
What Causes a Bear Market?
A bear market is one that is showing signs of a decline. Share prices are dropping to the point where seasoned investors believe that this trend will continue, at least for the foreseeable future.
Bull vs Bear Markets
It’s important to remember that a bull market is characterized by a general sense of optimism and positive growth which tends to catalyze greed. A bear market is associated with a general sense of decline which tends to instill fear in the hearts of stockholders. As Rule #1 investors, we act opposite of the investing public when it comes to bull vs bear markets and capitalize on their emotions by finding quality stocks at low prices during bear markets and selling during bull markets when they’ve regained their value.