What are Bull and Bear Markets?

In investing, there are two main types of markets: the bear market and the bull market. A bear market is when prices are falling and investors are worried. Conversely, a bull market is when prices are rising and investors are optimistic.

Why are They Called Bull and Bear Markets?

There are a few theories as to why financial markets are described as bull and bear markets. One theory is that the terms are derived from the way that each animal attacks its prey. A bull will thrust its horns up into the air to attack, while a bear will swipe its claws down. Applying this metaphor, a bull market is one where prices are “going up” (or rising), while a bear market is one where prices are “going down” (or falling).

Another theory is that the terms are derived from the way that each animal moves. A bull will charge forward, while a bear will shuffle backwards. Again, in the financial world, a bull market is one where prices are “moving forward” (or rising), while a bear market is one where prices are “going backwards” (or falling).

Whatever the origins of the terms, they are now firmly entrenched in the financial lexicon and are used to describe the two different types of market conditions.

What Causes Bull and Bear Markets?

The official definitions of bull and bear markets refer to a period of at least two months when a broad market measured by an index such as the S&P 500. If it falls by 20% or more, it indicates the bear market. If it rises by 20% or more, it indicates the bull market.

So, a bull market is a market that is on the rise, where prices are increasing and investors are confident. This upswing in market prices can be caused by a variety of factors, such as an improving economy, rising company profits, or increasing consumer confidence. Bull markets can last for years, and often end with a sudden “crash” when prices suddenly drop.

At first glance, a bull market is good for investors, as it provides the opportunity to make profits on their investments. However, it can also be a time of speculation and irrational exuberance, which can lead to financial bubbles and crashes.

Conversely, a bear market is a market where the prices of securities are falling and investors’ pessimism is increasing. A bear market typically refers to a decline in the stock market over a period of time, usually lasting for more than two months.

A bear market can be caused by a number of factors, including economic recessions, high interest rates, political turmoil, and natural disasters. When one of these events occurs, it can lead to a decrease in the demand for stocks, which in turn can lead to a bear market.

Bull and Bear Market Examples

The last bull market started in 2009 and lasted until 2020. This was one of the longest bull markets in history. During this time, stock prices more than quadrupled. The bear market that followed was much shorter, lasting just a few months. However, it was very severe, with stock prices falling by more than 30%.

What is the difference? Bullish vs. Bearish Markets

So, to review, a bullish market is a market that is on the rise, while a bearish market is a market that is on the decline.

Here are some key differences between the two:

In a bull market, prices are rising and investor optimism is high, while in a bear market, prices are falling and investor pessimism is high.
A bullish market is typically associated with economic growth, while a bearish market is typically associated with an economic recession.
A bullish market is typically a good time to be investing, while a bearish market is typically a good time to be selling.
In a bull market, stocks are typically bought on the expectation of future price increases, while in a bear market, stocks are typically sold on the expectation of future price decreases.
A bull market typically lasts longer than a bear market.

If you’re interested in adding stocks to your portfolio at the right market conditions, sign up for Gratis today and be one of the first to download the Gratis app when it is available in your region!

All Equities related services offered by Gratis will be provided by Eurotrade Investments RGB Ltd.

‘Gratis app’ is a registered trading name of Eurotrade Investments RGB Ltd, a Cypriot Investment Firm (CIF) under the Registration Number HE317893, licensed and regulated by the Cyprus Securities and Exchange Commission (CySEC) under license 279/15 with registered address at 70, Kyrillou Loukareos Street, Kakos Premier Tower, 1st Floor, 4156, Limassol, Cyprus.

The information on this site is not directed at any country outside the EU and is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

Gratis does not provide investment advice. Nothing on this site is a recommendation to invest. Gratis does not offer Contract for differences (CFD’s).

Investing in financial instruments can entail a number of risks which can lead to losses of your capital, please see our Risk Disclosures

The value of an investment in stocks and shares can fall as well as rise so you may get back less than you invested. Past Performance is no guarantee for future results

Join the waitlist

One step closer to financial freedom


    * By signing up to our waitlist, you agree to receive email(s) from Gratis, with updates about our app in your region and your place on the waitlist. Gratis will process your personal data in accordance with our privacy policy. This waitlist does not entitle you to receive services of any sort from Gratis, including, for the avoidance of doubt, brokerage services.