The terms Bull and Bear are used to describe the trend of markets, understanding this as the direction in which a market (or certain sectors and securities) moves in a time interval.
Bull Market:
Specifically, the Bull Market refers to an upward trend, that is, in which asset prices are rising or are expected to rise in the future. This trend is characterized by optimism and investor confidence. A Bull market can occur for several reasons: the mood of investors, recovery after a crisis, political stability or an economic boom.
Bear Market:
On the other hand, in the Bear Market the trend is bearish: prices fall and expectations about these prices are also negative for the future. There is no common agreement on this trend, but it is generally accepted that a market is down when its price drops by 20% or more within at least two months. The main reasons for encountering this trend may be: an economic crisis or the collapse of a financial bubble. Contrary to Bull markets, investors show distrust and uncertainty.
Origin of Terms:
The exact origin of the terms is unknown, although there are two generalised explanations. According to the former, the terms bear and bull come from how each of these animals attack their opponents: the bull lifting its horns and the bear clawing down or trying to crush its prey. Thus, in a metaphorical way, these actions explain the direction of the market trend.
The second explanation has a historical background: the intermediaries in the sale of bear skins sold the skins that had not yet reached them. This speculation by intermediaries about the future purchase price was linked to the falling markets.
* Photo of the square where the Frankfurt Stock Exchange is located.
Alejandro O. Asharabed Trucido
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