What are bear and bull markets?

A bull market is one where prices are rising, whereas a bear market is one where prices are falling. The two terms are also used to describe types of investors. These terms gives a general impression of how the market is doing. This article covers:

• What drives bull and bear markets?
• How to predict bull and bear markets?
• What do you about the conditions in bull and bear markets?

The media as well as investors often use terms such as bull market and bear market. They give a general impression of how the market is doing. A bull market is one where prices are rising, whereas a bear market is one where prices are falling. The two terms are also used to describe types of investors. A stock market bull is someone who has a very optimistic view of the market; they may be stock-holders or maybe investors who aggressively buy and sell stocks quickly. A bear investor, on the other hand, is pessimistic about the market and may make more conservative stock choices. Sometimes, the terms are used to refer to specific funds or stocks. Bear market funds, for example, are those that are falling and faring poorly. Investors sometimes refer to bull stocks to describe securities that are aggressively rising and making their investors money.

Knowing what is meant by the bear and bull market can help you understand whether the market is currently rising or falling. There is no need to get frightened by a bear market indicator; however, as experts agree that the market is cyclical. When prices start falling, they will eventually recoup.

What Drives Bear and Bull Markets?

The stock market is affected by many economic factors. High employment levels, strong economy, and stable social and economic conditions generally build investor confidence and encourage investors to put their money in the stock market. Often, this can bolster bull markets. Also, new technologies and companies that encourage investors to put their money in stocks can create bull markets. For example, in the 1990s, the dot com craze encouraged many investors to put their money in stocks that they felt would keep increasing. In some cases, a bullish market is simply self-perpetuating. Since the market is doing well, it only encourages investors to invest more money or to start investing.

On the other hand, discouraging economic or social political changes in a society can push the market down. Sudden instability or unemployment -- or even fears of unemployment caused by wars and other problems -- can start to make investors more conservative and therefore lead to bear markets. Of course, again this becomes a self-perpetuating trend. As the economy slows down, companies begin downsizing. Increased unemployment makes people far less willing to gamble on the stock market. Sometimes, a panic caused by dire predictions about the market can also create bearish conditions.

Continue to : How to Predict Bear and Bull Markets?

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