Bull and Bear Markets
Stock returns are influenced by a myriad of factors such as valuations, corporate profits, business cycles, monetary policy, and politics. The political influence is not necessarily linked directly to a particular party, however, there is an obvious trend towards a decline in the market, or Bear Market, when our political leadership is progressive or leaning towards socialism policy.
Bull Market
If the market is on the rise, it is generally considered a Bull Market.
A bull market is a period of generally rising prices. The start of a bull market is marked by widespread pessimism. This point is when the "crowd" is the most "bearish". The feeling of despondency changes to hope, "optimism", and eventually euphoria, as the bull runs its course.
Many investors are wishing to buy securities while few are willing to sell in the Bull Market.
When a nation is experiencing a Bull Market Economy, GDP of the economy is rising and job creation is also on the rise.
It begins as a general perception of the investment community. In this early stage most of the market changes are psychological and may not necessarily be accompanied by strong economic information or Corporate earnings. Once all of the hype has spread then evidence of the impact on the market is visible. Prices of listed securities will begin to rise sharply, and there is a large demand for various trading strategies.
Bear Market
If the market is in decline, it is generally considered a Bear Market.
A bear market is a general decline in the stock market over a period of time. It includes a transition from high investor optimism to widespread investor fear and pessimism. One generally accepted measure of a bear market is a price decline of 20% or more over at least a two-month period. A smaller decline of 10 to 20% is considered a correction. Once a market enters correction or bear market territory, it isn't considered to have exited that territory until a new high is reached.
A bear market is more dangerous to invest in, as many equities lose value. Since it is hard to time a market bottom, most investors withdraw their money from the markets and sit on cash until the trend reverses.
When a nation is experiencing a Bear Market Economy, there is often a recession and and stock prices are plummeting. A lot of "short selling" will take place under such an economy which can further depress economic conditions.
