Skip to main content Skip to main navigation Skip to accessibility page Skip to search input

 

What is a bear and bull market?

    

    

Most investors will have heard the term bull or bear market being thrown around at some point. Whilst they are terms that have entered everyday language, it is important to grasp a clear understanding of what they mean.

Bear Market

A Bear Market is used to describe a market in which there is increasing investor pessimism. There can be a wide range of contributing factors however common characteristics are low investment levels and falling share prices. The nature of a bear market is also cyclical with falling share prices and decreased spending on investment often leading to greater pessimism and so on.

A technical guide for labelling a bear market is when there is a market dip of 20% or more from the 52-week high.
 

Bull market

A bull market is the opposite of a bear market and represents positive investor sentiment. During a bull market investors are confident, share prices are rising, unemployment is low and the economy is strong. Similarly, a technical guide to help define a bull market is when the market has risen 20% above the 52-week high.
 

Investors as bears and bulls

The term bears and bulls is not only reserved for market descriptions but is often used to characterise investors. A ‘bear’ investor is one who sells his shares under the impression that the market is about to dip. Whereas a ‘bull’ investor is again the opposite, an investor who buys shares as they believe market prices are about to increase.
 

What is the difference between a market correction and a bear market?

Both terms can be defined in relation to significant fall in share prices. However, a market correction is usually the result of a temporary price dip before the market readjusts itself. Whilst a bear market stems from negative investor sentiment and is not usually as temporary.

As a rule of thumb a 10-20% decrease in market prices can be considered a market correction whilst a fall greater than 20% can be considered a bear market.

 


 

The information on this website has been prepared without taking account of your objectives, financial situation or needs. Because of this, you should consider its appropriateness, having regard to your objectives, financial situation and needs and, if necessary, seek appropriate professional advice. If a Product Disclosure Statement is available in relation to a particular financial product, you should obtain and consider that Product Disclosure Statement before making any decisions about whether to acquire the financial product.

The information contained on this website does not constitute the provision of advice or constitute or form part of any offer, solicitation or invitation to subscribe for or purchase any securities or other financial product nor shall it form part of it or form the basis of or be relied upon in connection with any contract or commitment whatsoever. Any securities or prices used in the examples on this website are for illustrative purposes only and should not be considered as a recommendation to buy, sell or hold. Past performance is not a reliable indicator of future performance. This website may contain material provided directly by third parties. This information is given in good faith and has been derived from sources believed to be accurate at its issue date. While such material is published with necessary permission, no company in the Westpac Group nor any of their related entities, employees or directors (together, "Westpac"), nor the Participant, accepts responsibility for the accuracy or completeness of, or endorses any such material. This website may also contain links to external websites. Westpac and the Participant do not accept responsibility for, or endorse the content of, such external websites. Except where contrary to law, Westpac and the Participant intend by this notice to exclude liability for material provided directly by third parties and the content of external websites.