Technically Speaking: The Difference Between A Bull And Bear Market

Bull and Bear Market: Definition & Difference

The chart below shows that, aside from minor market corrections, a bull market persisted for more than a decade. More specifically, Bull and Bear Market: Definition & Difference however, a bear market describes any stock index or individual stock that drops 20% or more from its recent highs.

While there is no precise definition of a bear market, it is generally considered to occur when stock prices fall by 20% or more from their previous peak. In bulls market, the stock prices are high, which is just opposite in the case of bears market. This means, if they believe the market is trending in a bullish direction then they can open a long position. If they think the opposite, and they believe the market is bearish, then they can open a short position. This gives traders the opportunity to make profits in both bullish and bearish markets. A bear market occurs when broad market prices fall at least 20% from the most recent high over a few months. Many crypto holders look for strategies for sustainable success and prefer long-term strategic asset allocation, such as dollar-cost averaging .

What It Means For Investors

The smallest percentage gain was 20.8%, between October 9, 1946, and June 15, 1948. A large, sudden drop in the market as a whole, or even just one segment of the market, can snowball into a panic. We’ve witnessed this and have been impacted by the stimulus and rescue packages issued by the government in the middle of the COVID-19 pandemic. This usually happens in the midst of a bear market because something’s wrong, says Young. “There was some sort of shock to the system, or some sort of crisis at play.” Besides the pandemic, this happened during the mortgage crisis.

Bull and Bear Market: Definition & Difference

The first was in 2011, as the U.S. was dealing with a potential debt-ceiling and threat of a downgrade of the U.S. debt rating. Then Fed Chairman Ben Bernanke came to the rescue with the second round of quantitative easing which flooded the financial markets with liquidity. As pension funds have found out, counting on 7% annualized returns to make up for a shortfall in savings leaves individuals in a vastly underfunded retirement situation. Making up lost savings is not the same as increasing savings towards a future required goal. The material provided on this website is for information purposes only and should not be understood as an investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents. We do not make any representations or warranty on the accuracy or completeness of the information that is provided on this page.

Why is it called a bear market?

A bear market can signal more unemployment and tougher economic times ahead. Historically, in terms of bulls vs bears stocks, equity market benchmark indices tend to spend more time rising than falling.

  • It’s like going to a flea market and everything is on sale, we get really excited.
  • Over 22 years, there have been five instances of bullish trend as compared to three instances of bearish trends.
  • During this time, the economy is thriving, and there are low unemployment rates.
  • The use of bulls and bears in financial terminology dates back to the 17th century.

It is generally said that as markets scale up over time, without falling for more than 20% from its previous 52-week peak, it is considered as a bull market. Similarly, the term bear market is applied to the market condition when it is expected to fall, or it falls broadly by 20% from its peak. Such a situation depicts a downward trend in the market over some time. The markets have a pessimistic approach, and the prices of assets are either in decline or expected to fall in the immediate future. It will cost investors a lot of money as security prices fall across the board, and investor confidence is also expected to hit. If bull markets take place when investors are optimistic, bear markets happen when pessimism takes over. There seems to be no price low enough for which to sell assets, as sellers crowd out buyers.

Definition of Bull Market

Many investors are willing to take on more risk in a bull market, but you may want to think carefully about your personal risk profile and have a long-term strategy in mind. A bear market occurs when prices are falling, or when they’re expected to decrease. Like bull market, the term usually refers to the stock market, but it can also be used in the context of real estate, currencies, and other commodities. There’s no formal metric to measure when a bear market is happening, but a 20% decline in prices is sometimes used as the threshold. In a bullish market, the liquidity flowing in the market is vast, and investors continue to pump more funds with increased trading activity and invest in stocks, gold, real estate, etc. Still, the liquidity dries up in the system in a bearish market, and investors are reluctant before making any commitments.

  • Regular bear markets, where prices drop and take a few months to a year to rise, are called cyclical bear markets.
  • Growth stocks tend to be more volatile compared to other stocks, but they can also offer higher returns.
  • I’m going to tell you about how to take advantage of a bull and bear market.
  • If the stock market is bullish and you’re concerned about price inflation, then allocating a portion of your portfolio to gold or real estate may be a smart choice.
  • “Regardless of cyclical swings, historical experience shows the best time to invest is consistently,” says Michael Weisz, president and founder of Yieldstreet, an alternative investment platform.
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