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What is Bull Market V/s Bear Market? All you need know

December 2, 2022

What is Bull Market V/s Bear Market? All you need know

What is Bull Market V/s Bear Market?

Stock market fluctuations are like a Nation's heartbeat, which constantly fluctuates according to its circumstances. Therefore, the market will move in either direction (up or down).

During a bull market, the stock market increases when the overall market environment is optimistic. In contrast, a bear market occurs when the market declines.

What is a Bull market?

Bull market

During a bull share market, most investors buy, demand outweighs supply, the market is confident, and prices are high. In the given market, if you see prices quickly trending upwards,

this could be a sign that the majority of investors are becoming optimistic or bullish about the price increasing further and may mean that people are looking at the start of a bull market.

What is Bear Market?

Bear market

In a bear market, supply exceeds demand, confidence is low, and prices are declining.

Therefore, "bears" are pessimistic investors who think prices will keep decreasing. Bear markets can be challenging to trade in, especially for novice investors.

A bear market is said to begin when stock values generally fall by 20% and continue to trend lower. In a bear market, people lose their jobs, the GDP declines, and the stock market value declines.

Bear markets can present investors with purchasing opportunities and generally never endure as long as bull ones.

Difference between Bull and Bear market:

The comparison between the two is as follows:

Bull Market

  • Industrial output is steadily increasing, and GDP rapidly increase. Economically, there is a huge demand, which boosts sales.
  • The purpose of the high-interest rates is to prevent the economy from overheating by deterring excessive investment.
  • The wholesale inflation is higher because consumer wants are higher, and production is keeping the result of good production conditions.
  • As more and more foreign investors seek to make investments in the economy, the demand for domestic currency rises, which causes the economy to grow.
  • Higher taxes are applied to limit the amount of disposable income in the hands of the consumer or producer to keep the economy from overheating.
  • The industry thrives and creates more jobs when the economy is strong.

Bear Market

  • Expected GDP growth is low, and industrial output is steadily declining. Sales are down due to the economy's poor demand.
  • The central bank continuously lowers interest rates to encourage investment and increase economic output.
  • A decline in production increases the cost of sustaining a certain standard of living and maintaining a stable demand.
  • As foreign investors reduce their investments in the country, the demand for a local currency decreases, causing the currency to depreciate.
  • Increasing subsidies and decreasing taxes stimulate the economy by encouraging consumers and producers to have more disposable income.
  • In times of economic uncertainty, businesses lay off more employees to keep afloat and reduce losses resulting from falling industrial output. It causes unemployment to rise.

Strategies for Bull market and Bear Market:

Strategies for Bull market and Bear Market

Buy low and sell high is the best investment maxim. That means you should typically buy in a bear market and sell in a bull market.

Bull markets sometimes lead investors to rush to the equity markets and only sell their holdings for a profit in a subsequent bull market.

You need to know if you are catching a knife or a mango when you buy during a bear market.

It indicates that when purchasing a stock in a bear market, one should always choose fundamentally sound businesses; otherwise, they risk catching a stock that is more like a falling knife.

Conclusion:

An investor must know that a bear market typically indicates a weak economy and decreasing stock values, whereas a bull market typically indicates rising stock prices.

While it's simpler to feel confident about your investments during a bull market, keep in mind that when a bear market occurs, sticking to your course is typically the best thing you can do with your money.

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