Bear v Bull Market Whats the Difference?

Bull and Bear Market: Definition & Difference

This can be observed via the Fear and Greed Index, which measures the sentiment of the market (and therefore its likelihood to make rational decisions, founded on facts rather than emotion). By monitoring the index, you can get a sense of whether value within the market is based on fundamentals or FOMO. The term bull market is often used loosely and is not a fixed or precise way to describe the state of the market. However, a few key characteristics will help you to identify one for yourself. A bear market often occurs just before or after the economy moves into a recession, but not always.

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  • Consequently, many will start liquidating more volatile assets and place their funds into more stable assets, such as precious metals or government bonds.
  • Crypto traders usually buy during bearish markets for the benefit of lower cryptocurrency prices.
  • Do not infer or assume that any securities, sectors or markets described in this article were or will be profitable.
  • While that may sound simple enough and the only obvious thing to do, the reality may be different for many traders.
  • Price inflation may be a problem when the economy is booming, although inflation during a bear market can still occur.

While bear markets have become less frequent overall since World War II, they still happen about once every 5.4 years. During your lifetime, you can expect to live through approximately 14 bear markets. The terms ”bear” and ”bull” are thought to derive from the way in which each animal behaves. In contrast, bears hibernate, so bears represent a market that’s retreating. Because the businesses whose stocks are trading on the exchanges are participants in the greater economy, the stock market and the economy are strongly linked.

Rolling with the bears and bulls of the stock market

That fear, specifically, is that a coming downturn will wipe out wealth. Whether your sentiment is bearish or bullish, one way to manage your investment portfolio is to work with a financial advisor. There’s no way of telling how long a bear market will last, especially if it’s driven by recession or similar circumstances. So, the issue is not knowing when exactly the dip will last, and how much further prices can drop.

Why is it called a bear market?

Believe it or not, the term "bear market" originates with pioneer bearskin traders. The country's early traders would sell skins they'd not yet received – or paid for. Because the traders hoped to buy the fur from trappers at a lower price than what they'd sold it for, "bears" became synonymous with a declining market.

After being in a bear market since June 2022., the S&P 500 entered a bull market on June 8, 2023, after rising 20% from its October 2022 lows. Both the Dow Jones Industrial Average and the Nasdaq are also in bull markets, having entered them on Nov. 30, 2022, and May 8, 2023, respectively. You need a bullish trading system (the right tool) to ride a bullish market. When trading in either market direction, it is crucial to be aware of both bullish and bearish continuation and reversal patterns. Being able to identify these price action patterns will provide an edge to your trading strategy and show potential opportunities in a rising or falling market. When a bull market is happening there is general optimism among investors that prices will rise further, with the number of buyers overwhelming the number of sellers.

Prevailing interest rates

So, it’s important to understand how each of these market conditions may impact your investments. Investors who purchase stocks or other holdings during a bear market must be prepared for the prices of these holdings to drop further before bottoming out. Using a robo advisor like M1 Finance will enable you to keep your investing costs low. If optimism is the currency of a bull market, fear is the legal tender in a bear market. Bear markets can be triggered by any number of things, from global upheaval like wars or the pandemic, to government crypto bans or hints from regulators about an impending crackdown.

Bull and Bear Market: Definition & Difference

A bullish investor, also known as a bull, believes that the price of one or more securities or indexes will rise. Sometimes a bullish investor believes that the market as a whole is due to go up, foreseeing general gains. In other cases an investor might anticipate gains in a specific industry, stock, bond, commodity or collectible. If an investor is, say, bullish about ABC Corp., this means that he or she thinks that specific company’s shares will climb. The expression “bull market” is thought to originate from the upward motion a bull’s horns make as it charges and attacks. In a crypto bull run, prices are surging, exuberance is high and the direction of the arrow on price charts is pointing up (line go up).

Difference Between Bull and Bear Market

To avoid reacting to market fluctuations, refrain from looking at your portfolio often. It’s a natural instinct to want to immediately respond to a loss in value, so skirt around that knee-jerk reaction by checking up on your investments as little as possible. You can see how, as an investor, understanding these two scenarios is key to determining what to do with your money. Bull and Bear Market: Definition & Difference Dan is a veteran writer and editor specializing in financial news, market education, and public relations. Earlier in his career, he spent nearly a decade covering corporate news and markets for Dow Jones Newswires, with his articles frequently appearing in The Wall Street Journal and Barron’s. Bear markets are closely linked with economic recessions and depressions.

There were few if any safe havens for investors in the bear market that ended in early 2009. J.P. Morgan Wealth Management is a business of JPMorgan Chase & Co., which offers investment products and services through J.P. Morgan Securities LLC (“J.P. Morgan”), a registered broker dealer and investment adviser, member FINRA and SIPC. Compensation paid to the Publisher will be up to $500 per completed contact form. Morgan and therefore information, opinions, or referrals are subject to bias.

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