The terms “bull” and “bear” markets are often used to describe how stock markets are doing in general—whether they are appreciating or depreciating in value.
A bull market occurs when the economy is doing well—unemployment is low, GDP is high, and stocks are rising. If people are optimistic, believing that stocks will rise, they are called “bulls.”
On the other hand, a bear market is when the economy is NOT doing well— unemployment is high, and a recession is approaching. If people are pessimistic, believing that stocks are going to drop, they are called “bears.”
History of Bull and Bear Markets
Bull markets typically tend to last much longer and have much greater returns than bear markets. Because bear markets are so short and severe, it’s impossible to get out in time consistently. In many cases, by the time people realize they’re in a bear market and start to get nervous, they’re probably closer to the beginning of a bull market.
What to do?
In a bull market, investors should take advantage of rising prices by buying early and then selling later when the prices have reached their peak. During a bull market, investors can invest in more equity with a higher probability of making a return.
In a bear market, the chances of loss are greater because prices are continually losing value. Investors are better off short selling or making safer investments, such as fixed-income securities.