The names "bull" and "bear" are widely used in the investment sector to refer to market situations. These words refer to the general performance of stock markets—whether they are increasing or falling in value. And as an investor, the market's direction is a huge factor that significantly influences your portfolio. As a result, it's critical to understand the influence of bull vs bear market conditions on your assets.
A bull market exists when the economy is growing and the stock market increases in value, whereas a bear market exists when the economy is contracting. Let's examine these two market types in further detail and their implications for your investing approach.
Bull Market in India
Bull markets are formally defined as those in which stock values have gained at least 20% from the last market crash. Bull market situations may span decades, and many successful investors have made poor predictions about when a bull market will end.
Bear Market in India
A bear market begins when stock values widely decrease by 20% and continue to trend lower. Bear markets are characterized by job losses, gross domestic product (GDP) decline, and a considerable decline in the stock market's value. Bear markets usually seldom last as long as bull markets and might provide investors with purchasing opportunities.
What is a Bull vs Bear Market
A bull market is one that is on the rise and in which economic circumstances are typically favorable. A bear market develops when the economy is contracting, and the majority of equities are losing value. In addition, because investor attitudes have a significant impact on the financial markets, these phrases are used to describe how investors feel about the market and the consequent economic developments.
A bull market is defined by an extended period of price growth. In equity markets, a bull market refers to an increase in the prices of firms' stocks. Investors frequently believe that the rise will continue in the long run under such circumstances. The economy is normally robust, and employment levels are high in this scenario.
A bear market, on the other hand, is one that is seeing a downward trend in value. Generally, a market is not considered a real "bear" market until it has declined 20% or more from recent highs. In a bear market, stock prices continue to fall.
Consequently, investors assume the negative trend will continue, which feeds the downward cycle. The economy slows during a bear market, and unemployment increases as businesses lay off employees. So, this was a major difference between the Bull Vs Bear market.
Bull Market and Bear Market Difference
If you want to determine whether the market is bull or bear, you can go through the below factors and determine where to invest.
The performance of the stock market
In a bull market, stock prices rise; in a bear market, they fall. Under bullish conditions, the stock market consistently gains value, despite temporary market corrections. Under bearish conditions, the stock market loses value or remains stable at lower prices.
A rising GDP indicates a bull market, whereas a declining GDP indicates a bear market. GDP grows as corporate revenues and employee compensation rise, allowing for more consumer spending. GDP declines when businesses have slower sales and salaries remain stable or decline.
Bear markets are strongly related to recessions and depressions in the economy. When GDP declines for two consecutive quarters, a recession is proclaimed, whereas depression occurs when GDP drops by 10% or more and the downturn last at least two years.
Changes in the unemployment rate
A dropping unemployment rate indicates a bull market, whereas an increasing unemployment rate indicates a bear market. Businesses expand and hire during bull markets but may be obliged to reduce headcount during bad markets. A growing unemployment rate tends to extend a bear market, as fewer individuals earning pay means fewer revenue streams for many businesses.
Price inflation may be a concern while the economy is thriving. However, inflation can also occur during a bad market. In bull markets, increased demand for products and services can result in price increases, whereas declining demand in bear markets can result in deflation.
Interest rates are currently in effect.
Interest rates are generally low during bull markets and high during bear markets. Low-interest rates make it more inexpensive for firms to borrow money and expand, but high-interest rates tend to stifle growth.
Bull vs Bear market history
Let us see the bull vs bear history, how these names came and what they represent. While the terminology is straightforward, the impact of a bull or bear market on your portfolio and wealth is indisputable. Both creatures are renowned for their enormous and unexpected power, and the picture each conjures up when it comes to stock market volatility is unmistakably accurate.
The words "bear" and "bull" are believed to stem from how each animal assaults its adversaries. A bull will raise its horns in that instance, but a bear will swipe down. These acts were then figuratively compared to a market's movement. If the trend went upward, this was referred to be a bull market. If the tendency was downward, a bear market existed.