Some stock market jargons can sound pretty foreign to beginner investors, yet they shouldn’t be missed out when trying to understand how the market performs. 

One of the phrases that can often be found on stock market news is the “bullish” vs “bearish” market. These terms can be applied to any financial market, such as stocks, bonds, commodities, and currencies. 

What is a bull market?

A bullish market refers to a financial market where the prices of assets are generally rising, and investors are optimistic about future price trends. They expect prices to rise, therefore bullish investors are often looking for opportunities to buy assets with the expectation of selling them later at a higher price. 

Characterised by high levels of buying activity, a bullish market can be resulted from a variety of factors such as strong economic indicators, high investor confidence, positive news about the market or individual companies, and other positive factors. Generally when the sharemarket is ‘bullish’, the economy is strong and unemployment is low.

What is a bear market?

A bear market is the opposite of a bull market, which refers to a financial market where the prices of assets are generally falling, and investors are pessimistic about future price trends. This can be driven by many factors such as weak economic indicators, low investor confidence, and negative news about the market or individual companies. If the market falls by 20% or more from the 52 week high, it has become a bear market.

Characterized by high levels of selling activity, investors are more likely to sell assets in a bearish market because they believe the assets will decrease in value in the future, hoping that they can buy them back later at a lower price.

Why are they important to understand?

Moreover, “bullish” and “bearish” can also be used to describe individual stocks or other assets. For example, if an investor is bullish on a particular stock, they believe that the stock will increase in value. Conversely, if an investor is bearish on a stock, they believe that the stock will decrease in value.

Overall, the market sentiment is influenced by a range of factors, such as economic indicators, political developments, and news events. Bullish and bearish terms are important to take these environmental factors into consideration, therefore helping investors make informed decisions about buying or selling assets based on their expectations for the market or a particular asset.