In the investing world, the terms "bull" and "bear" are frequently used to refer to market conditions. These terms describe how stock markets are doing in general—that is, whether they are appreciating or depreciating in value. And as an investor, the direction of the market is a major force that has a huge impact on your portfolio. So, it's important to understand how each of these market conditions may impact your investments.
- A bull market is a market that is on the rise and where the economy is sound; while a bear market exists in an economy that is receding, where most stocks are declining in value.
- Although some investors can be "bearish," the majority of investors are typically "bullish." The stock market, as a whole, has tended to post positive returns over long time horizons.
- A bear market can be more dangerous to invest in, as many equities lose value and prices become volatile.
- Since it is hard to time a market bottom, investors may withdraw their money from a bear market and sit on cash until the trend reverses, further sending prices lower.
Bull Market vs. Bear Market
A bull market is a market that is on the rise and where the conditions of the economy are generally favorable. A bear market exists in an economy that is receding and where most stocks are declining in value. Because the financial markets are greatly influenced by investors' attitudes, these terms also denote how investors feel about the market and the ensuing economic trends.