UNIT 11 Bull and bear market

A Bull market is associated with increasing investor confidence, and increased investing in anticipation of future price increases. A bullish trend in the stock market often begins before the general economy shows clear signs of recovery.

Bull.

An investor who thinks the market, a specific security or an industry will rise. Investors who takes a bull approach will purchase securities under the assumption that they can be sold later at a higher price.

A Bear market is a general decline in the stock market over a period of time. It is a transition from high investor optimism to widespread investor fear and pessimism. According to The Vanguard Group, "While there’s no agreed-upon definition of a bear market, one generally accepted measure is a price decline of 20% or more over at least a two-month period." It is sometimes referred to as "The Heifer Market" due to the paradox with the above subject.

Examples: A bear market followed the Wall Street Crash of 1929 and erased 89% (from 386 to 40) of the Dow Jones Industrial Average's market capitalization by July 1932, marking the start of the Great Depression. After regaining nearly 50% of its losses, a longer bear market from 1937 to 1942 occurred in which the market was again cut in half. Another long-term bear market occurred from about 1973 to 1982, encompassing the 1970s energy crisis and the high unemployment of the early 1980s. Yet another bear market occurred between March 2000 and October 2002. The most recent examples occurred between October 2007 and March 2009.

Bear

An investor who believes that a particular security or market is headed downward. Bears attempt to profit from a decline in prices. Bears are generally pessimistic about the state of a given market.

Example: if an investor were bearish on the S&P 500 they would attempt to profit from a decline in the broad market index. Bearish sentiment can be applied to all types of markets including commodity markets, stock markets and the bond market.