Where "Bulls" & "Bears" Come From

‘Bull market’ and ‘bear market’ are terms you probably would have come across at some point. These phrases are widely used in the industry to convey how the markets are performing.

The terms are also technically used to describe economic conditions, and this is reflected in the markets. The context of the usage of these terms plays an important role. Typically, bull and bear markets are used to denote a specific asset class such as stocks, bonds, real estate or even the economy.

  • A bull market depicts the environment that is generally optimistic and expanding.
  • A bear market depicts an environment that is the opposite of the bull market; pessimistic and contracting growth.

Thus, when the markets are rising, the markets are said to be a bull market and when the markets are falling, the markets are said to be bear markets.

Generally, when there is a correction of 20% or more from the 52-week high, we tend to refer to this as a bear market, or simply bearish. Depending on who you ask, this can be around 10% – 20% which is an acceptable range.

Similarly, when the markets rise 20% or more from the correction, it is said to be a bull market. Within the bull markets, there is another term called the secular bull market. A secular bull market is one which lasts between 5 – 25 years or more.

During a secular bull market, it’s common to see the markets correcting at least 10% over the course.

Origin of the Terms 

The term bull market is obviously derived from the bull. With its sharp horns that are inclined upward, bulls are known to attack by generally swinging their head upwards.

On the other hand, the term bear market is derived from the bear. A bear generally attacks with its paws, striking down. Another fact about the bears is that they tend to hibernate for prolonged periods of time.

Thus, drawing an analogy from the characteristics of the bull and bear markets, traders generally use these terms to depict whether the markets are going up or down. In other words, it depicts the optimism and sentiment in the markets.

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