Bear vs. Bull Market

The terms ‘bear’ and ‘bull’ are used to describe the outlook of and level of optimism with regard to a given market. Markets can be characterized as bearish or bullish based on supply and demand for assets, investor psychology, and changes in economic activity.

Generally, a bull market is characterized by upward pricing trends and expectations of increased market share prices, usually at times when the overall economy is strong. In these periods, demand for assets is notably greater than the available supply of assets, resulting in sustained appreciation of asset prices. Further driving up prices is prolific investor confidence in the long-term outlook of the market.

Bear markets are generally characterized by downward pricing trends and pessimistic outlooks regarding the long-term health of the market. Supply of assets is greater than demand for assets in these periods, driving the equilibrium prices for these assets down. Bearish trends typically emerge during periods in which the overall economy is suffering, in part a result of the diminished disposable income of the general population.