Bull vs Bear Market: Here’s the difference and what they mean for you!!

Introduction:

Bull Market and Bear Market are the two terms that are mostly heard in the financial world and are frequently used to describe market trends. By these terms, everyone knows how the stock market is working in general. These two are kinds of code words to tell whether the market prices are on a hike or on the drive. It’s very important for all those who are investing in the stock market or thinking to invest. In this blog, the terms “bull market”, and “bear market” as well as their differences are described in detail.

Lets’ know about the Bull Market:

A period during which there is a constant hike in stock prices or the stock prices are expected to rise is known as the Bull Market.

The word Bull Market is mostly used in the Stock Market and can be used anywhere in the aspect of trading things like bonds, real estate, currencies, and goods.

In the Indian Stock Market, the recent illustration of a Bull Market was from December 2011 to 2015 when the Sensex rose up to 98%.

In the financial industry, the term “bull market” is used to indicate an optimistic and expanding nation’s economic environment.

Although there is no definite way to recognize a bull market, it normally occurs when all sorts of financial instruments, such as stocks, bonds, real estate, etc., experience sustained price increases.

This explains why investors who are optimistic about the stock market are referred to as bullish.

Main factors of the Bull Market:

Here are the three main key factors of a bull market through which it is indexed: 

1.   Country’s Gross Domestic Product (GDP) Increases:

If a nation’s GDP is higher than it was in the preceding period, it suggests that consumer spending is likewise high, which is a typical sign of good health of an economy.

2. When there is a rise in Stock Prices:

When the price of the stock rises, people become more confident that the market will continue to go up in the near future and consequently utmost major indicators will also rise.

3. Countries’ Employment Rate Increases:

Growth in the economy leads to expansion of businesses, which increases employment.

Since in a bull market, stock prices generally rise across the board, it generally presents a multitude of profit making possibilities to those who invest in the stock market.

Let’s know about the Bear Market:

When the stock prices constantly fall downwards then this time in the Stock Market is known as the Bear Market. A Bear Market is the contrary condition of the Bull Market.

The Indian Stock Market period between March 2015 and February 2016 was the recent illustration where Sensex dropped by approximately 23%.

It illustrates a trend of stagnation and downfall in the economic graph where people’s confidence is low and they start selling their stocks instead of buying because they feel the loss in that. Bear Market is also a good indicator of recession. 

Main factors of a Bear Market:

Here are the three main factors of a bear market: 

1.   High Unemployment Rate:

A bear market is often indicated by a high employment rate. Companies experience business losses during economic downturns, which leads to layoffs.

2.   Fall in Stock Prices:

Less people are willing to acquire stock as stock values begin to decline. As a result, stock prices decline more and the market slumps.

Investors must learn to endure in all economic cycles, including bear markets:

Even though a bear market appears to be dreadful, it usually ends quickly. Economic issues will come and go, but the stock markets’ resilience has been witnessed repeatedly. In a bear market, it would be prudent to alter portfolios by putting more money into safe investment opportunities that consistently produce stable income, as it is not possible to predict when the bear market will end. These instruments include debt mutual funds, bonds, and fixed-income investments like FDs, etc.

The differences of Bull Market and Bear Market:

The terms “bull” and “bear,” which are frequently used in the stock market, are derived from the attacking styles of these animals.

A bear swipes its paws over an opponent while a bull raises its horns up in the air.

These actions are therefore used as metaphors for the stock market’s movement.

Bull Market is when the market trends upwards and the bear market is when the market trends downwards.

These are the major 10 differences of Bull Market and Bear Market:

S.NO	BULL MARKET	BEAR MARKET
1	Bull Market = Market is on hike	Bear Market = Market is on drive
2	Stocks are bought in large amounts.	Stocks are sold in large numbers.
3	Higher opportunities for employment.	Unemployment rises.
4	Country’s GDP rate rises.	GDP falls.
5	It’s a sign of optimism.	It’s a sign of pessimism.
6	Usually occurs while the economy is expanding or when it is already robust.	Tends to occur when the economy is already weak or is weakening.
7	Over the course of a bull market, investor confidence tends to increase.	Over the course of a bear market, investor confidence often falls.
8	Both the general mood of the market and the demand for stocks is positive.	There is a decline in the overall demand for stocks.
9	Initial Public Offering (IPO) activity often increases throughout a bull market.	In a bear market, IPOs typically decline in number.
10	Investors are more eager to participate in the stock market during a bull market in order to make profit.	Investors are more eager to sell their stock holdings during a bear market in order to limit loses.

It’s a good idea to spend some time researching the market before making an investment decision because both bull and bear markets have a significant impact on your finances. This blog will help you to understand about both the bull and bear markets. Keep in mind that the stock market has consistently produced good returns over the long run.