4.12 What is Bulls And Bears?

BULLS AND BEARS

We often come across the terms bulls and bears in the stock market. What do they mean? What, for instance, is a bull market? A bull market is slang to mean a situation when stock prices increase for an extended period of time. If investors are ‘bullish’ they are referred to as ‘bulls’ because they believe a particular company, industry, sector, or market in general is going to go up. A bull market is the opposite of a bear market. What is a bear market? A bear market is also slang but used when stock prices decrease for an extended period of time. If investors are ‘bearish’ they are referred to as ‘bears’ because they believe a particular company, industry, sector, or market is going to go down.

Look at any bear market and even at its lowest point you will find stocks that do quite well. Similarly, in any bull market, there are stocks that do poorly. Please understand that a rising or ebbing tide does not necessarily raise or lower all the stocks in a market. When the overall market is declining or rising significantly, the intelligent investor has a real advantage over the person who has invested on a whim. If you know the company behind the stock you will be able to judge whether the decline in the stock’s price is simply a reflection of the market’s general pessimism or a signal that something is fundamentally wrong with the company.

Where did the bull and bear market get their names? Why bull and not any other animal? Likewise, why bear and not any other animal? How these terms originated is still very unclear. But an explanation can be attempted by the manner in which these animals attack their opponents. A bull will thrust its horns up into the air, while a bear will swipe down. These actions were then related metaphorically to the movement of a market: if the trend was up, it was considered a bull market and if the trend was down, it was a bear market.