Difference Between Bull and Bear Market
Bull Market and Bear Market are two situations in the market that are opposite of each other where in the bull market, the price of stocks keeps increasing, while the opposite happens in the Bear Market situation. Situations like these frequently happen daily but are only said to be Bull or Bear if they happen for a longer duration. A Bull and Bear being the exact opposite of each other, have multiple differences between them, and some of them are mentioned below:-
Bull and Bear Market
| S.No | Bull Market | Bear Market | |
| 1. | Explanation | Bull Market is a stock market situation where the value of the stocks keeps increasing or is expected to increase continuously in future. Increase in the value must be at least 20% of the base value of the stock. | Bear Market is a stock market situation where the value of the stocks keeps decreasing or is expected to be continuously decreasing in future. Decrease in the value must be at least 20% of the previous value. |
| 2. | Time Period | Bull Market is only meant for longer periods such as Months or Years. | Bear Market is also meant for longer periods such as Months or Years because fluctuations in the stock market keep happening frequently. |
| 3. | Naming Analogy | Its name is given after the animal named Bull because bull pushes things high in the air with its Horns. The analogy of Bull pushing things in the air is used to indicate the rise in the value of the stocks. | Its name is given after the animal named Bear because Bear takes things down with its claws. The analogy of Bear taking things down is used to indicate the decrease in the value of the stocks. |
| 4. | Characteristics | Bull Market is dependent on Positive Sentiment, Increase in GDP, and Low Unemployment Rate. | Bear Market is dependent on Negative Sentiment, Decrease in GDP, and High Unemployment Rate. |
| 5. | Average Duration | 3 Years | 10 Months |
Factors affecting the Bull and Bear Market Situation:
There are no specific parameters or metrics that can depict the Bull or Bear run, but some parameters influence the market situation, and these factors might help us know where the wind is blowing.
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Some of these parameters are.
Fundamentals
When the fundamentals of the companies are great, and they are performing better on major indexes such as S&P 500, etc. hence Bull Run is likely, but a Bear Market situation can also happen with companies with good fundamentals.
Sentiment
When the sentiment among the investor is positive about the rise of the value of Securities, then there might be a chance of expecting a Bull Market, while the Negative Sentiment among investors regarding decreasing trend of the market value of shares indicates a Bear Market situation.
Economic Factors of a Nation
The Economic Factors of a Nation, such as GDP, Employment Rate, Inflation, etc., indicate whether the market is going to be on Bull Run or Bear. An increase in GDP and a decrease in the unemployment rate means increased spending, which results in increased profit for corporates hence Bull Run is observed. While the decrease in GDP and increase in the unemployment rate means less spending, which results in less profit for corporates; hence Bear Market is observed.
Investing in Bull and Bear Market
As Investment has always been a Risky matter so there should be some measures to consider before investing such that the risk becomes less. In Bull Market, to obtain profits Investors buy shares at a lesser rate and sell them when they feel that peak has achieved. While in the Bear Market, Investors buy shares at a very low rate and sell them when the market becomes Bullish.
To gain profit in the Bull Market, the investor should have a long-term investment plan and a diverse portfolio. Also, he/she should stick to the plan irrespective of the market situation while in the Bear Market, the person should be more careful in buying the securities such that the securities with good parameters and promising future should be brought only such that they give great gains when the market becomes Bullish in the future.
Bottom Line
The Bull and Bear markets are the opposite market conditions where in Bull, the market goes up, while in Bear, it goes down. Both of the markets upon Sentiment, GDP, Unemployment Rate, Inflation, etc. Great gains can be obtained from both situations, provided that one must invest subject to some constraints.
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