Stock Market Definitions: Bullish & Bearish

by Geri Terzo

A bullish investor is someone who invests with an expectation that stock prices will rise. Conversely, a bearish investor believes financial market conditions are not conducive to gains and therefore trades stocks accordingly.

Identification

An investor with bearish sentiment views increases in stock market value as an opportunity to sell stocks and exit the market. Bullish investors hunt opportunities to enter the stock market at bargain prices and ideally to be rewarded with future profits.

Features

Investors can profit in both bullish and bearish market periods. When the stock market is expected to rise, bullish investors go long or buy stocks. Investors may also "short" a stock, which is to bet on its decline. Mostly, traders and institutional money managers including hedge funds participate in shorting stocks.

Considerations

Bullish investors may eventually change over to the bearish camp. Meredith Whitney, a financial analyst with Meredith Whitney Advisory Group, is historically credited with calling bull runs in financial stocks and the broader markets. Her opinion soured in November 2009 when she suggested that stocks were rallying with little justification and that gains were not sustainable, according to CNBC.

Expert Insight

Investors who want exposure to best-of-breed stocks should not wait until a bear market before entering the holding, according to Tom O'Halloran, a mutual fund manager at Lord Abbett, cited in SmartMoney. He says expensive stocks are appropriately priced during market rallies.

Fun Fact

The American Association of Individual Investors (AAII) releases a weekly report that assigns a percentage value to bullish, bearish and neutral sentiment in the stock market for the forthcoming six-month period. Survey participants are members of the AAII.

About the Author

Geri Terzo is a business writer with more than 15 years of experience on Wall Street. Throughout her career, she has contributed to the two major cable business networks in segment production and chief-booking capacities and has reported for several major trade publications including "IDD Magazine," "Infrastructure Investor" and MandateWire of the "Financial Times." She works as a journalist who has contributed to The Motley Fool and InvestorPlace. Terzo is a graduate of Campbell University, where she earned a Bachelor of Arts in mass communication.

Photo Credits

  • Image by Flickr.com, courtesy of Michael