Er...what are bull and bear markets?

Aug 17, 2008

FINANCIAL QUOTIENT

Er...what are bull and bear markets?

Where do you see this?

Mainly in stock market reports and analyst notes.

What does it mean?

These are the two key animals associated with overall market movement. Bulls are good times, bears are bad.

A bull market is a prolonged period in which almost all stock prices surge faster than their historical average. Investors are optimistic and indulge in buying sprees.

For instance, the Indian stock market went on a bull run from last January to this January, soaring from 14,000 points to 21,000 points.

A bear market is an extended period in which stock prices fall, usually by more than 20 per cent. There is widespread pessimism, and sometimes there are steep selldowns accompanied by irrational fear.

The most famous bear market was the Wall Street crash of 1929 which eventually sparked off the Great Depression.

Why is it important?

These two terms encapsulate overall market sentiment and price movements.

It is believed that the terms originated from the nature of these animals. Bears tread with caution while bulls are bold and love to charge forward.

Thus, a bearish investor feels the market will go down while a bullish investor thinks it is headed for new heights.

So you want to use the term? Just say...

The bull run of the last few years has ended and we are now entering a bear market.

Alvin Foo



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