Bulls and Bears

1. Bulls and Bears

2. Bulls • Most investors’ favorite animal is clearly the bull. The term is used in several ways: • Referring to the stock market, it describes a period in which prices rise for a lengthy period of time. • When it comes to people, bullish describes one who is optimistic. 

3. How this usage came about is not entirely clear. A bullish investor is one who buys a stock in the expectation that its price will rise. This could be compared with bulls charging ahead, stampeding prices higher. Or it could simply reflect the fact that bulls habitually toss their heads upward. 

4. To be considered a bull market, prices need not rise continuously. There can be days, weeks and even months in which prices fall. What matters is the long-term trend. • Generally it is considered a 20% rise over previous low

5. Bears • The Street’s least favorite animal is the bear. This term is used to describe downers — both stock prices and individuals. • It originated from the old days, when traders used to sell bearskins before the bears were actually caught. • In the stock market, it applies to people who expect prices to decline. 

6. As for how much of a price decline constitutes a bear market, the rule of thumb seems to be at least 20 percent. However, a lot depends on how long the drop lasts. The quicker the rebound, the less likely that investor psychology will turn from optimism to the pessimism that usually accompanies a bear market.