Market observers, traders, and investors may not be entirely unfamiliar with the term “Bulls and Bears,” but what precisely does it mean, how did it develop, how can you trade in bullish and bearish markets, and what distinguishes the two markets? What you should know is as follows:
Markets: Bull vs. Bear
How Do Bear Markets Work?
The phrase “bear markets” or “bearish territory” made numerous headlines in the past few months as the war in Ukraine, inflation, rate hikes, sanctions on China, and recession fears among a cocktail of devastating factors took a toll on economies around the world, but these terms don’t actually mean anything.
What precisely does a bear market mean?
A decreasing, weakening, or falling market is referred to as a “bear market,” and situations like those seen in recent months may qualify. Furthermore, when a bear market develops, there are a number of other factors that come into play, including economic slowdowns, layoffs, and high unemployment rates.
Consider the recent burn that tech stocks experienced due to rising inflationary heat as an obvious indicator of a bearish market. This is because technology equities are often regarded as particularly vulnerable to depressing market sentiments brought on by inflation due to their reliance on future cash flows. As a result, investors choose to invest in safe-haven assets, which are goods and services that are thought to be more “inflation-proof,” rather than technology. To survive when their prices crashed and entered bearish territory, numerous large tech businesses, including cryptocurrency major Coinbase (COIN), electric vehicle manufacturer Tesla (TSLA), NVIDIA (NVDA), Microsoft (MSFT), and Intel (INTC), suffered severe losses and joined the layoffs train. This can be seen in the chip giant.
What Is a Bull Market?
Bull markets would be the equivalent to a bear market if it had one. So what exactly is a bull market, and how do bull and bear markets differ? In a stable economy, markets that are predicted to increase or are now rising are referred to as bull markets, whereas markets that have already fallen or are anticipated to fall from their highs in a declining economy, when most stocks lose value, are referred to as bear markets.