Bear and Bull Markets: What They Are and What They Mean to Investors

You may have heard that in 2018 the U.S. was experiencing the longest running “bull market” in history (from 2009 to 2018), but investment advisors are warning that the bull market will come to an end over the course of several months in 2019. They also caution that there will be another financial crisis in one to five years, as stocks in 2019 are coming out barely in the positive. This is mostly due to various geopolitical threats like the U.S.-China trade war, contentious Brexit negotiations, and rising interest rates, creating an uncertain environment for investors.

Sounds alarming, doesn’t it? But bull and bear markets come and go, and if you have a reliable wealth advisor then they will be able to help you prepare for the worst. If you don’t have a wealth management advisor, you should contact Wealth Management Canada so that they can help you find the perfect wealth management firm to help you manage your finances in these turbulent times.

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What are the Differences between a Bull and Bear Market?

The terms “bull” and “bear” markets are used to describe how stock markets are doing and whether they are appreciating or depreciating in value.

Bull Markets

A “bull market” is generally defined by a market that is doing well and experiencing a lengthy period where investment prices rise faster than they have in the past. Influencing factors of a market’s growth could be because of economic recovery, boom, or investor confidence. A bull market generally begins when the market rises 20% from its lowest point at the end of a bear market (which itself is measured by a 20% fall from a previous peak).

The last low set by the benchmark S&P 500 index was on March 9, 2009, but there’s been steady growth since then of up to 320%. The previous record bull market run was between October of 1990 and March of 2000. Unfortunately, it seems like recently the bull market has been showing signs of fatigue, and investors are anticipating the coming of a bear market.

Bear Markets

Psychology plays a huge role when it comes to the health of the stock market. When investors are confident they will pour more money into the economy and make more investments, but when they are worried about the state of the market then they will tend to be more frugal. Thus the psychology of the investors often influences the trends of the markets, and cautiousness lowers the value of stocks. This period is called the “bear market” and is marked by uncertainty and a sense of pessimism.

The origins of the names “bull” and “bear” markets are commonly believed to come from the way that a bull and bear fight. While a bull will thrust its horns upwards, a bear tends to swipe its paws downward. The upward and downward motion of these two creatures is a metaphor for the market rising (bull) and falling (bear).

No one really knows where these names originated from, but they’ve stuck, and it’s wise to know what they mean and how exactly they will affect your investments.