What Does the Bull & the Bear Mean in the Stock Market?

by Kristen May

One of the biggest tourist attractions near Wall Street in New York City is the charging bull statue in Bowling Green Park. The bull has come to be known as a symbol of financial prosperity, especially with regard to the stock market. The terms bull and bear were used to describe financial markets for many years before the statue was installed in 1989.

Bull Market

The market everybody wants to see is a bull market. This is one in which stock prices are increasing and investors want in. A true bull market is one with gains nearly across the board, although the term is sometimes used to refer to particular sectors of the market. A bull market doesn't just have one-time gains, but rather a sustained increase. This usually happens when employment is steady and the economy is doing well. There have been 13 documented bull markets since the stock market crash of 1929, including one that started in March 2009.

Bear Market

In contrast to a bull market, a bear market is one in which stock values are dropping on a sustained basis. Bear markets often occur during economic downturns when unemployment is high, disposable income is low and companies are struggling to post profits. Investors often turn to safer stocks during bear markets, or they get out entirely and transition into securities, bonds and other types of investments. The United States stock market was referred to as a bear market from 2007 to 2009.

Origins of Terms

The exact origins of the terms bull and bear to refer to markets are unclear, but there are some theories. One relates to bear skin traders in England who often sold skins before the bears had even been caught in hopes that they could buy the skins for less later, which is a form of short selling. The traders were called bears, and the bear market term was in use by the South Sea Bubble scandal in 1720. Bulls and bears were often paired in literature, which may have led to the bull being chosen in contrast to the bear. Another theory is that the terms relate to how the animals attack. Bears use downward motions to throw their opponents to the ground, whereas bulls charge forward and use their horns to toss opponents up.

Descriptions of People

In addition to using the terms bull and bear to describe market trends, they can also describe people. Someone who is always an optimist when it comes to the market, even when trends are suggesting otherwise, may be called a bull. On the other hand, pessimists who always think the market is going to crash may be referred to as bears. Bears often use techniques that work best in a bear market, such as short selling.

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