Bull and Bear Markets
An FLDC Presentation
What are Bull Markets?
• A bull market is associated with:
–increasing investor confidence
–increased investing in anticipation
of future price increases.
• A bullish trend in the stock market
often begins before the general
economy shows clear signs of
Why is it Called a Bull Market
– The term "bull" is used to describe the market,
because bulls attack by pushing their horns
out and up. Hence the thrusting motion up
resembles the upward move of the
markets. Also, when bulls run together, they
do so without looking back and go full steam
ahead. This is also the mentality of the
markets as traders and speculators trip over
themselves attempting to jump on the band
wagon for quick gains.
Characteristics of a Bull Market
• A bull market is accompanied with a
number of identifiers. Below are some
– High P/E ratios
– Endless news and media coverage of the
– Marginal retracements after each successive
Notable Examples of Bull Markets
• One bull market occurred right before the
great stock market crash of 1929. It lasted
• The most recent bull market lasted the
longest time to date, which was 15 years.
This bull market ended in the year 2000.
What are Bear Markets?
• A bear market is a general decline in the
stock market over a period of time. It is a
transition from high investor optimism to
widespread investor fear and pessimism.
Why is it called a Bear Market?
• During the 18th century, fur traders would
flood the market with bearskins in the
expectation that prices would rise. They
did not. The flooded market caused prices
to fall and a recession or a depression,
high inflation and high unemployment can
occur if it continues over a longer period of
Characteristics of Bear Markets
• In a bear market more people are looking to sell than
• During a bear market, market sentiment is negative as
investors are beginning to move their money out of
equities and into fixed-income securities until there is a
positive move. In sum, the decline in stock market prices
shakes investor confidence, which causes investors to
keep their money out of the market - which, in turn,
causes the decline in the stock market.
• A bear market is associated with a weak economy as
most businesses are unable to record huge profits
because consumers are not spending nearly enough.
This decline in profits, of course, directly affects the way
the market values stocks.
Notable Examples of Bear Markets
• The first major bear market came after the
stock market crash of 1929.
• The second most notable bear market is
Things to Keep in Mind
• When looking at market trends, one
cannot make a judgment on the general
trend of the market based upon 2 or 3
weeks of trends.
– Quarter, biannual, and annual trends are the
best way to determine whether a bull market
or a bear market is in process.
Tips for Taking full Advantages of
• Buy “hot” stocks when they are at low
• It is generally safe to invest more than
10% of your annual income in this type of
• Keep an eye out for different industries to
see which ones show the most growth.
Ways to Handle Bear Markets
• Generally invest in save options such as
Certificates of Deposit (CD’s)
• Invest in Fixed Income Securities
• Invest in government regulated stocks, as
these don’t change dramatically in value.
– Water, natural gas, electricity (utilities in
• There is no sure way to predict market trends, so
investors should invest their money based on the quality
of the investments. At the same time, however, you
should have an understanding of long-term market
trends from a historical perspective. Because both bear
and bull markets will have a large influence over your
investments, do take the time to determine what the
market is doing when you are making
an investment decision. Remember though, in the long
term, the market has posted a positive return.