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Bear Markets Vs Bull Markets

  • November 06, 2020
  • Drew Ragosta

The financial world likes to use strange industry jargon and terminology that is unfamiliar and even befuddling to new investors. If you’re a novice and have been searching through endless amounts of financial journals looking for answers to your questions, it is likely you’ve come across the subject matter of bear and bull markets. It is interesting that the financial world is one of the only industries that utilize strange terminology to describe simple concepts and phenomenons. So what are bear and bull markets and where do these austere names come from?

Bull Markets.

The symbol of the bull might call to mind the courageous matador armed with a sword and red muleta ready to fend off a bull’s fatal charge. One might reflect on Ernest Hemingway’s famous memoir on bullfighting Death In The Afternoon, or think of the untamed stars of the rodeo. Because the bull symbolizes strength, courage, and boldness it only makes sense that financiers would use this majestic creature as a way to describe a market where traders are confident and eager to invest.

When you hear someone say “I’m bullish,” you can assume they are assured and willing to bet their convictions about a rising stock price are true. A bull market is a universal manifestation of this sentiment and is usually the sign of a growing economy. Buying is heavily encouraged in a bull market and share prices are continually rising.

Bear Markets.

Originating from the way a bear claws downwards, a bear market starts trending when share prices begin to fall. Bear markets are the opposite of bull markets and tend to indicate a skeptical buyer’s market. While trading does occur in a bear market, much like the manner in which a bear slowly follows its prey before pouncing, the investor is far more calculated and strategic about making a trade.

When was the last time the United States experienced a bull market and a bear market?

Throughout the 1990s the stock market was trending as a bull market. Since the 1990s the most noteworthy and recent bull market trended between the years 2009-2019 and ended fairly recently with the outbreak of the pandemic This decade long run actually surpassed the booming markets of the 1990s.

The last prolonged bear market was between 2007-2009. In the wake of the 2008 financial crisis, it is no surprise this was the last time the country experienced an uncertain stock market. The two worst bear markets in history have led to recessions. These occurred during the Stock Market Crash of 1929 and the aforementioned 2007-2009 bear market that sent the S&P 500 sinking by approximately 50.9%. Since 1928, the United States has experienced 20 bear markets.

Bear and bull markets are a reality of the stock market and can impose a significant impact on the economy. New investors should always be wary of the reality that the market can change rapidly. Staying informed on recent market trends and consulting the opinion of financial experts will guide novice traders towards safe and strategic investments. Utilizing financial tools like Front will help new investors make the right stock picks and stay updated on important news. Using Front, you can rely on accurate data and stock picks that will help you to invest smarter. Please visit Front’s website or follow us on social media to learn more!

 

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