What is Bull and Bear market?
A bull market is a market financial situation which is characterized by the investor’s confidence, optimism and positive expectations that good results will continue.
The bull market is generally related to the stock market but it applies to all financial markets like currencies, bonds, commodities etc. During a bull market, everything in the economy is amazing like growing GDP, increased job, rising stock prices etc.
Bull markets often lead to the overvaluation of the stocks as the investors are highly optimistic and believe that the stock will always go up.
The opposite of a bull market is a bear market, which is typically characterized by bad economy, fewer jobs, recession and falling share prices. The investor’s behavior during a bearish market is highly pessimistic as they fear that the stocks will go down and down.
Bear markets make it tough for investors to pick profitable stocks.
NOTE: The ‘bull’ and ‘bear’ words that are used in the market is derived from the way these animals attack their opponents. A bull thrusts its horns up into the air upwards, while a bear swipes its paws downward. These actions are metaphors for the movement of a market. If the trend is upwards, it’s a bull market. And, if the trend is downwards, it’s a bear market.
If you want to read further in details, I will highly recommend to read the book- Bulls, Bears and Other Beasts: A Story of the Indian Stock Market by Santosh Nair, one of the best book on Indian Stock Market.
Bull and Bear market example for India:
India’s Bombay Stock Exchange Index, was in a bull market trend for about five years from April 2003 to January 2008 as it increased from 2,900 points to 21,000 points.
Example of Bear Market in India are – the stock market crashes of 1992 and 1994 and the dotcom crash of 2000. Further, the Great Depression of the 1930’s is the famous example of a bear market in the US.
Like all other markets bull market or the bear market does not last endlessly as no market can last forever. Further, It is difficult to predict the changing trends in the market as it is much influenced by the psychological effects and speculations of the investors.