Bull market vs Bear market

Asset allocations. expense ratios earnings per share let’s face it the word investing is rife with choices complexities and foreign jargon there are however two investment phrases that may be more familiar is a bull market and bear market while both are used to describe how markets are performing they are entirely different animals when it comes to the impact they can have on your portfolio and the investment decisions you make.

What is a bull market?

The financial market for stocks bonds and commodities are greatly impacted by consumer confidence and in bull markets which occur when investment prices are on the rise for sustained periods, confidence is soaring. Propelled by the thriving economies and low unemployment that usually accompany bull markets, investors are eager to buy or hold onto securities, thus creating a buyer’s market.

Throughout history, the bulls in U.S. markets have had some great runs, starting with the boom after World War II that exceeded the market’s peak before The Great Depression. Since that time, the market has experienced a series of bull markets, including the longest one from 2009 to 2019, which was on the heels of the collapse in the U.S. housing market.

But, as history has shown, bulls don’t run forever.

What is a bear market?

While bull markets are fueled by optimism, bear markets — which occur when stock prices fall 20% or more for a sustained period — are just the opposite. Bulls are generally powered by economic strength, whereas bear markets often occur in periods of economic slowdown and higher unemployment. Instead of wanting to buy into the market, investors want to sell, often fleeing for the safety of cash or fixed-income securities. The result is a seller’s market.

Bear markets can last from a few weeks to several years. The first and most famous bear market was The Great Depression. The dot com bubble in 2000 and the housing crisis of 2007–2008 are other examples.

Bull Market vs. Bear Market

A bull market is a market that is on the rise and where the conditions of the economy are generally favorable. A bear market exists in an economy that is receding and where most stocks are declining in value. Because the financial markets are greatly influenced by investors’ attitudes, these terms also denote how investors feel about the market and the ensuing economic trends.

A bull market is typified by a sustained increase in prices. In the case of equity markets, a bull market denotes a rise in the prices of companies’ shares. In such times, investors often have faith that the uptrend will continue over the long term. In this scenario, the country’s economy is typically strong and employment levels are high.

By contrast, a bear market is in decline. A market is usually not considered a true “bear” market unless it has fallen 20% or more from recent highs. In a bear market, share prices are continuously dropping. This results in a downward trend that investors believe will continue; this belief, in turn, perpetuates the downward spiral. The economy slows down during a bear market and unemployment rises as companies begin laying off workers.