Basic Investment Definitions: Bull and Bear Markets


Basic Investment Definitions: Bull and Bear Markets


Chances are, you have seen at least one of these movies:

  • The roaring 80’s Wall Street,
  • Leo D’s epic performance in The Wolf of Wall Street,
  • The comic relief of Trading Places,
  • The making of young millionaires revealed in Boiler Room,
  • Obi-Wan Kenobi’s Ewan McGregor’s role as a stockbroker in Rogue Trader,
  • Richard Gere playing a criminal in Arbitrage,
  • Or the Hollywood hunk fest that is The Big Short.

And you’ve probably heard at least once in these films the terms “Bull” or “Bear.” You might have thought – “What on Earth do these animals have to do with the stock market?”

Actually, they have everything to do with the stock market. These terms are used to describe market trends. Now, let’s unlock the mystery, shall we?

What Happens When the Market Is Bullish or Bearish?

The Bull and Bear expressions were believed to have been first used in 18th-century England. These terms are used generally because the animals’ characteristics and habits are somewhat similar to how the market behaves.

The Bull Market Explained

The word may sound negative when you first hear it but it’s actually the way to go! What is a bull market, you ask? A Bull market is a happy market. It’s when the economy is in great shape, people have jobs, income and productivity are high, growth is promising and all that jazz. Since the economy is good, people are drawn to investing. When people invest, demand for investments increase. When demand rises, stock prices also increase. It’s a wonderful show of domino effects.

One caveat on a Bull market is that, like all good things, they don’t last forever. One must take caution in taking on investments with too much optimism when the market is “bullish” as this could lead to overvalued stocks which could eventually lead to massive losses.

The Bear Market Explained

Winnie the Pooh may be cute and fluffy, but the Bear market isn’t cute at all. Basically, the market is a Bear when the economy is slowing down, unemployment rates are rising and stock prices are falling. This is when things really go south. Due to the decline in stocks, investors tend to become fearful and pessimistic as it could be difficult to find profitable investments. But fear not! A Bear market eventually recovers and as an investor, there are a couple different measures you can undertake to keep your investment afloat (see: short-selling 101).

Investor Academy - bull and bear market

Why the Terms Bull and Bear Used?

Many believe that the term “Bull” originated from its German root word which means “to blow, inflate, or swell” – tell-tale keywords for a thriving economy. However, the most-told origin theory of the term is how the bull fights – it thrusts its thorn up – which is a metaphor for the market going up. On the other hand, when a Bear fights, it swings its paws down – a metaphor for the market going down.

Now that we’ve decoded what a bull and bear market is, you’ll be familiar with it as you invest or probably on the next stock market movie. When it all gets quite confusing, remember to “BS”. Bull = Spirited; Bear = Sluggish.