According to Stock Market Advisory Company, the most common definition of bear and bull market that everyone is aware of is, if the GDP is rising, it is considered a bull market and if the GDP is falling, it is considered a bear market.
The bull market is a trend that has been going on for a few years, like 10 years or more, which can also have a correction called the bear market phase. A correction is a decent decline in the value of a market index or the price of a sole asset. The decline is usually 10% or more from the recent peak.
Brief Introduction: Bear Market And Bull Market
A bear market is indicated by investors being conservative and pessimistic in a declining market when stock is being sold in large numbers. A bull market, on the other hand, is indicated by investors being intrusive and optimistic, with stock prices increasing as a result.
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Let’s Understand Bull Market
A bull market is the condition of the stock market in which prices are increasing or are expected to increase.
Since stock prices fluctuate largely and continuously, the name “bull market” is typically restrained for extended durations in which a large portion of prices are rising. Bull markets can last for months and also years.
Bull markets are identified by positivity, investors’ trust, and expectations that strong results should continue for an extended duration of time. It is tough to predict consistently when the trends in the market might alter. Part of the drawback is that psychological effects and theories may often play an important role in the markets. These markets are difficult to guess and predict and are usually recognized after it has occurred.
Features of Bull Market
Bull markets usually come into the picture when the economy is becoming stronger or if it is already strong. It usually coincides with an increase in business profits. It inclines to happen with a sturdy GDP and a decline in unemployment. Investor trust
will also tend to rise throughout a bull market timeline. The whole demand for stocks will be high, along with the whole tone of the market.
Now Understand Bear Market
A bear market when compared to Bull Market is the exact opposite, prices are decreasing. The market faces a prolonged decline in prices.
The origination and reasons for a bear market usually differ. In general, a loose or declining economy will bring a bear market along. The indications of a declining economy are basically high unemployment, less income, and a drop in corporate profits. Bear markets are identified by pessimism and low investor confidence.
Features of Bear Market
Bear markets are noticed when investors become pessimistic and start selling their investments. They also avoid buying more as the prices start to decrease. The stock value starts decreasing. Investors try to invest money in safe assets as their confidence is lowered. Customers decrease their buying.
Bear Market vs Bull Market
Bull and Bear market complete opposites. One is identified by increasing prices and the other by declining prices. The investors are optimistic in a Bull Market and pessimistic in a Bear Market.
The main factor concerning both markets which also indicates their features is the Gross Domestic Product (GDP). If the GDP is rising, it is considered a bull market as the economy is increasing. If the GDP is declining, then it can harm the economy. A low GDP can have many reasons but it is followed by consumers buying fewer products. With fewer customers spending money, a bear market can be seen.
Also, if the stock prices are rising, people believe the market is growing leading to a bull market. If the stock prices are lowering, people do not trust the market, indicating a bear market. People do not prefer buying stocks in the period.
Another major factor of difference is the unemployment rate. Lower unemployment level shows that business is growing and marks a bull market. Many jobs are available in this phase. High unemployment rates show that businesses are forced for a layoff due to a weak economy. This is a sign of a bear market and it is tough to get out of one. In simple terms, if the trend is high, it is a bull market. If the trend is low, it is a bear market.
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