Bull and bear market are the two major types of conditions in the stock market or the economy. A bull market is a market or economic situation where there is a rise in stock/asset prices. There is an overvaluation of stocks by the investors (“bullish”) as they are confident and optimistic (positive expectations). Typically, in this condition, the country’s economy is strong and employment levels are high.
Example: During the period of December 2011 and March 2015, Sensex shot up by more than 98%.
On the other hand, a bear market is where there is a decline in stock/asset prices. The investors (“bearish”) gradually become pessimistic (negative expectations) towards the stock market. Such a market situation occurs when there is a slowdown in the economy and the unemployment rates are high.
Example: The stock market during the COVID-19 pandemic is the most recent noteworthy bear market.
Also, during the period of March 2015 and February 2016, Sensex dropped by more than 23%.
The ‘Great Depression’ that started in 1929 in the U.S is also a notable example of a bear market
NOTE: The terms ‘bull’ and ‘bear’ are derived from the way these animals attack their enemy. A bull attacks by bringing its horns upwards, while a bear swipes its paws downward to attack its enemy. So, by comparing this to the movement of a market, we can say that if the trend is upwards, it’s a bull market. And, if the trend is downwards, it’s a bear market.
Major differences between Bull and Bear market
| BULL MARKET | BEAR MARKET |
| Upward trend | Downward trend |
| Investors are optimistic. Majority of investors buy stocks in large volume | Investors are pessimistic and tend to sell their stocks |
| Rise in GDP | Fall in GDP |
| Low unemployment | High Unemployment |
| Usually takes place when the economy is strong or strengthening | Usually takes place when the economy is weak or weakening |
| An average Bull market can exist for several years | An average Bear market is short-lived ; lasts for not more than 1-2 years |
