by Nikita Yadav
Many times we came across the words “Bull Market” and “Bear Market”. So basically when there is a rise in stock prices and a strong economy, then the market is a bull market. Some of the famous bull markets are 1925-1929, 1993-2000 and 2003-2007. For a bull market, SENSEX and NIFTY have to rise over many months and years. But when stock prices are continuously dropping or when there is an economic recession then the market is said to be a bear market.
Some of the famous bear markets are 1929(Great depression), 2008(financial crisis) and 2000-2002. For a bear market, SENSEX AND NIFTY have to drop over many months and years. If an investor is positive about some stock that the price will rise with time then, the investor is bullish on that stock and if the stock prices decrease with time then the investor is bearish on that stock. Traders and investors like the bull market but when the stock prices become overvalued then it can be a dangerous investment for the investors. Many investors become greedy during the bull market as the stock prices are increasing continuously and they start investing aggressively without doing any analysis so that they cannot miss any profit. While during the bear market, an investor is in fear and start selling their stocks due to the continuous drop in the prices and likes to stay away from the bear market. Value investors take the full advantage of a bear market as they get various good stocks at lower prices at that time.
The bull market tends to happen when there is a strong economy, strong GDP growth, strong company profits or when there is a 20% or more rise in stock prices followed by previous or by another 20% or more decline. while Bear Market tends to happen due to cutting back by companies, closing locations, laying off workers, high unemployment and slow growth.
The term bear market is named for how a bear tends to attack. A bear usually swipes his paws in a downward direction on its prey. For this reason, declined in stock prices is a bear market. Similarly, the term bull market is derived from the way a bull attacks his prey because bull tends to charge his thrones in an upward direction that’s why the period of the rise in stock prices is called a bull market.
Unfortunately, for investors bull market period that lasts for too long can leads to bear market. Some bull market ends because of large economic issues and bad factors. Likewise, at some point during a bear market investors will eventually be enticed by low stock prices and begin reinvesting in the market. As trading activity increases and investors confidence begins to grow, a bear market can eventually transition to a bull market. From 1957 to 2018 there were 10 bull markets and 10 bear markets. The bull lasted for 55 months and gained over 150% while the bear market lasted just for a year and lost over 34%.