Bull vs. Bear Market
We often hear the market referred to as either bull or bear markets. What do these descriptions mean and how can we use them to interpret the way of the economy?
A bull market is a market that is strong, growing, and prosperous. We use the term to describe an upward trend or a market that we feel has the ability to remain stable. Generally speaking, the economy is strong, unemployment rates are low, and the overall feeling of investors and experts is that we are in a stable state. Bull markets indicate companies are most likely expanding to meet the demands of consumers and prices are competitive.
A bear market is a market that has been declining and suffering from an unstable economy. This market develops with an economic recession, high unemployment rates, and rising inflation. During this time, we see companies contracting and a lack of faith in the market as a whole. People are less likely to invest in the economy as the unpredictability of a bear market ending prevails.
It is natural for the market to fluctuate between the two. We will spend a period of time riding the high of a bull market only to experience a period of recession through a bear market. Each time, we grow and learn how to make the transition less painful or devastating. Now the next time you hear the market being described as an animal, you will understand the state of the economy and why things are working a certain way.