What is Bull and Bear market? Stock Market Basics | Trade Brains (2024)

What is Bull and Bear Market?

Bull Market

A bull market is amarket financial situation that is characterized by the investor’s confidence, optimism, and positive expectations that good results will continue. The bull market is generally related to the stock market but it applies to all financial markets like currencies, bonds, commodities, etc.

During a bull market, everything in the economy is amazing like growing GDP, increased jobs, rising stock prices, etc. Bull markets often lead to the overvaluation of the stocks as the investors are highly optimistic and believe that the stock will always go up.

Bear Market

The opposite of a bull market is a bear market, which is typically characterized by a bad economy, fewer jobs, recession, and falling share prices. The investor’s behavior during a bearish market is highly pessimistic as they fear that the stocks will go down and down. Bear markets make it tough for investors to pick profitable stocks for the short term.

NOTE: The ‘bull’ and ‘bear’ words that are used in the market is derived from the way these animals attack their opponents. Abullthrusts its horns up into the air upwards, while abearswipes its paws downward. These actions are metaphors for the movement of a market. If the trend is upwards, it’s a bull market. And, if the trend is downwards, it’s abear market.

If you want to read further in details, I will highly recommend to read the book-Bulls, Bears and Other Beasts: A Story of the Indian Stock Marketby Santosh Nair, one of the best book on Indian Stock Market.

Bull and Bear Market Example for India

India’s Bombay Stock Exchange Index, was in a bull market trend for about five years from April 2003 to January 2008 as it increased from 2,900 points to 21,000 points. Examples of Bear Market in India are – the stock market crashes of 1992 and 1994 and the dotcom crash of 2000. Further, the Great Depression of the 1930s is a famous example of a bear market in the US.

Like all other markets bull market or the bear market does not last endlessly as no market can last forever. Further,It is difficult to predict the changing trends in the market as it is much influenced by the psychological effects and speculations of investors.

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