bear and bull market simplified

Explaining bear and bull markets

What does the phrase “bear market” signify, which you’ve obviously heard a lot lately?

“Bear market” has been in the news lately. But what does it mean?

What distinguishes it from a Bull market?

And what concerns animals in any of these?

Let’s start with definitions:

  • Bear market: Declining prices.
  • Bull market: Rising prices.

A market is said to be in a Bull or Bear when there is a rise or fall of 20% or more from a most recent high or low respectively.

When using these terms, investors use them in relation to the following financial markets – The S&P 500, Nasdaq, and Dow Jones Industrial Average. However, they can also be used to refer to specific stocks or other assets.

Why the use of animals?

The origins of the terms are the subject of numerous theories. One is that it’s how they kill: while bears use their claws to swipe down at prey, bulls gore prey by thrusting their horns upward.

An old saying cautions against selling a bear’s skin before the animal has been caught, according to a widely accepted theory.

In the 18th century, people would refer to someone as a “bearskin jobber” who had “sold the bearskin” if they sold something they did not yet own in order to purchase it later at a lower price.

In the 18th century, people would refer to someone as a “bearskin jobber” who had “sold the bearskin” if they sold something they did not yet own in order to purchase it later at a lower price.

  • The South Sea Bubble, a financial collapse in 1720 involving the South Sea Corporation, a trading company that ended up being essentially worthless despite its once-soaring stocks, contributed to the wider popularization of that phrase.

And if that’s how the word “bear” got its start, another idea holds that the word “bull” originated from people forcing bears and bulls to battle for entertainment.

  • Tosin Adeoti on Personal Finance (thowsyne@gmail.com)

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