I am sure everyone is watching the stock market very closely. As you hear a lot of terms out there on what kind of market we are in, a lot of financial commentators are stating the bull market is over and now we are in a bear market. A lot of people have asked me, what exactly does that mean? Below is a high level overview of the differences between a bull and bear market. Please feel free to ask any questions in the comment section below.
A bull market is the condition of a financial market in which prices are rising or are expected to rise over a certain time period. The term "bull market" is most often used to refer to the stock market but can be applied to anything that is traded, such as bonds, real estate, etc. The term "bull market" is typically reserved for extended periods in which a large portion of security prices are rising over that time period. Bull markets tend to last for months or even years. Though there are a wide range of different factors that contribute to a bull market, the two biggest ones are a strong economy and high employment levels across the board. The most common definition of a bull market is a situation in which stock prices rise by 20%. Since bull markets are very difficult to predict, it is typically only recognized after it has happened. A notable bull market in recent history was the period between 2003 and 2007. Today we are officially moved to a “bear” market, with the Dow and S&P 500 having tumbled more than 20% below their all-time highs in February. That ended a record-long bull run that started in 2009 after the last recession.
A bear market is exactly the opposite of a bull market. It’s a market where quarter after quarter the market is moving down about 20 percent. That signals a bear market, and when that happens people start to get really scared about putting money into the stock market. For a fun fact, the reason it is called a bear market is because the way this particular animal, the bear, attacks its victims. A bear swipes downward during the attack. Bear markets are caused by individual events, such as a pandemic virus, or general slow downs in the economy. Bear markets last a variety of lengths. Some can last for just several weeks, while some bear markets can last for years. Most experts agree we have entered a bear market, but unsure how long it will be. A lot of smart people buy during the bear markets, but timing is everything. Make sure you speak with a financial advisor before investing.