The world of finance uses words and terms that some people do not understand. The terminology that investors and traders use is some of the most difficult and complicated in the financial world.
Bearish and bullish markets, day trading, fundamental and technical analysis are just some of the terms used every day in stock markets across the globe.
This article aims to explain in simple words what bull and bear markets are. Investors who begin their journey now may find it helpful to know what these two terms mean as they will likely read them in financial articles and news bulletins.
What is a bull market?
The expression “bull market” comes from the way that the bull attacks his victim.
The bull will stamp his victim and drive its horns up in the air. When investors talk about a bull market, this means that this is a market in which asset prices are on the rise.
In general, asset prices, such as stocks, bonds, commodities, etc., rise when investors are feeling confident and increase their investments in anticipation of future price increases.
The Dow Jones Industrial Average (DJIA) has consistently hit new highs over the last ten years.
The most recent DJIA all-time high of 29,551.42 was logged during the longest bull market in history. This 11-year bull market started on March 11th 2009, and ended on March 11th 2020, according to economists.
The all-time high for the UK’s FTSE 100 is 7877.45 points, which was reached on May 22nd 2018. A breakdown in the Brexit negotiations at the beginning of May had forced Sterling to lose value against the US dollar, thus boosting the FTSE 100 to hit a record high.
What is a bear market?
Just as the bull market takes its name from the way that the bull attacks, the bear market’s name is associated with the way that a bear confronts its rivals.
A bear will lower its body and swipe its paws downwards, towards its enemy, when it’s ready to engage.
A bear market is exactly the opposite of a bull market, meaning that asset prices are dropping while investors are starting to feel pessimistic about the future market conditions.
Economists suggest that bear markets set in before periods of general economic contractions.
The history of US recessions shows that stock market indices recorded losses months before a Gross Domestic Product (GDP) decline. However, a bear market and market correction should not be confused.
A correction lasts for a limited period, and generally, the indices’ fall isn’t more than ten percentage points. The most famous bear market in history was the one that occurred in the US stock markets from 1929 to 1933.
Make investing straight forward
The world of investing can seem complicated. The terminology alone can be a barrier for new investors.
With a wealth of experience and market knowledge, HWM’s investment experts can help to simplify the process.
Whether you’re new to investing or looking to expand your existing portfolio, we can help. To speak with us and find out how we can help you, contact us using the form below.
