Bull Market vs. Bear Market? What You Need to Know
What Is a Bull Market?
Technically, a bull market is defined as a time when prices rise — generally by 20% or more. This trend then continues over time, with prices sustaining their highs or continuing to increase; this encourages more investors to join in and start buying, fueling a virtuous cycle of continual price rises.
Types of Bull Markets
When you hear bull markets discussed, chances are that it’s referring to stock market indices (namely the S&P 500, NASDAQ, or Dow Jones Industrial Average). However, bull markets can occur in markets for all kinds of investments.
What Is a Bear Market?
The mechanisms here are very similar to those found in a bull market, except for everything happens in reverse: prices decline, so more investors sell, resulting in prices to continually decline. As a result, you can expect slow growth and high unemployment in addition to declining prices.
Bull markets and bear markets shouldn’t be looked at in isolation — they both form part of the economic cycle. During the economy’s expansion, the bull market is in full swing; then, after it reaches its peak, it creeps into a bear market.
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