If you are in the investing world recently, you may have heard the terms like “Bull Market” and “Bear Markt“. Well, you don’t have to wonder more, here in this article, let’s discuss bull and bear market elaborately.
What is a Bull Market?
“ Bull Market” is a term which indicates the economic environment growing too fast and has scope to rise. There is no way to identify a bull market. As a result, it typically means that bonds, stocks and real estate are rising for an extended period of time. In the time of the bull market, investors are often optimistic that the uptrend will continue over the long term. Typically it means that the country’s economy is strong and employment level is an all-time high.
Let’s discuss some of the key indicators of a bull market:
High Gross Domestic Product (GDP):
The economy of a country always flourishes when the country’s GDP is high. If the country’s Gross Domestic Product is high that means the spending of the consumer is also high. Therefore, a country’s GDP is clearly an indicator o bull market.
Low Unemployment Rates :
Growth in business or in the stock market clearly means that the workforce is growing. When companies flourish, they usually create a job opportunity. It means that people will get more jobs and there will be low unemployment rates.
Long Stock Trading
Since the country’s financial climate is hopeful, investors are more likely to buy shares as much as they can and Hold on to them. They are confident that the stocks they bought will continue to rise. And this is called the long stock trading.
Rising Stock Prices
When investors are confident that their share’s price will grow, the price of the stocks also grows rapidly.
What is Bear Market?
The bear market is completely opposite of the bull market. It indicated pessimism, loss on investments, and a usually regarded “bad” economy. In this market, people usually understand that the market is low and that is why they sell their stocks. Therefore, it is the time of selling stocks, not the time of buying.
Some of the Key Indicators of Bear Market are :
When a bull market indicates high employment, the bear market indicates loss of jobs. The employment of the country significantly drops and it is typically a sign of bear market.
The Fall of Share Prices
The price of the stocks significantly falls as people now knows about the market condition. They hesitate to buy any shares. As a result, prices of shares go down and companies struggle to maintain its financial growth.
Short Stock Trading
To get benefit from a down market, investors usually sell shares they don’t own. They later buy the shares at a lower price. And this is exactly what is called “short Stock Trading”.
Well, you finally know the definition of both the bull and bear market. Now, let’s discuss the key differences between them.
Bully Market Vs Bear Market
- The market is considered as the bull when the overall market scenario is quite good and the market performance is on the trend. However, in a bear market, the performance of the market is on the decline.
- The economy grows rapidly in a bullish market whereas in a bearish market the economy will either decrease or not grow at a faster pace as in the bullish market. In both these situations (bull vs bear market), GDP (Gross Domestic Product) plays an important role. When the country’s GDP is in good position it indicates a bull market. Whereas, if the GDP is low, it indicates a bear market.
- The employment rate in a bullish market is too high. Whereas, in a bearish market unemployment rate becomes high.
- In a bullish market, the liquidity flowing in the market is very large, investors are optimistic and continue to buy more funds with increased trading activity. They increase their activities buying stocks, gold, real estate etc. But in a bearish market, the liquidity dries up in the system and investors usually hesitate before taking any steps.
- In a bullish market, investors usually tend to buy more stocks, resulting in an increase in the share price. Whereas, in a bearish market, investors usually tend to sell their stocks. As a result, the price of the stocks decreases.
- International investments will automatically get encouraged in a bullish market with the intention to expand its business in a particular country. For example, if India is going through a bullish phase and China decides to make huge investments in India, such a move will encourage the smooth phase for India, enhance the investment made by China and in turn boost the economy for China. Thereby making both the countries financially stronger than before. However, in a bearish market, international investments may not be seen from other countries and they usually postpone their investment.
Now, you finally come to know everything related to Bull and Bear market. They are just the terms to indicate the present state of the stock market. So, if you have learned something new, please don’t forget to share, and most importantly bookmark us for future updates.