Knowing your bull and bear markets

by | May 15, 2015 | Business

There are several global stock market indices that determine overall market movements. Alongside, there are distinct market types that you must be aware about. Bull and bear markets are increasingly common phenomena as far as global stock markets are concerned. Bull markets are usually markets which are seen to rise consistently over a period of time. Investors are usually seen as more positive and upbeat in such markets owing to the perceived robustness and strength of the economy in such cases. These market patterns are witnessed when consumer demand is on an upswing and unemployment rates are usually low. Enhanced consumer demand usually translates into greater profits for companies and businesses and this in turn, drives their stock prices high which results in a market boom of sorts. Investors often earn windfall profits in these cases owing to higher values of their invested company shares.

Share supply is usually low in bear markets as investors are reluctant to let go off their precious company shares. In addition, there is widespread competition among investors with regard to acquiring company shares on an upswing on the basis of soaring global stock market indices. Risks are increasingly taken by investors in such a scenario as they always stand a chance of making fabulous profits on their investments. On the other hand, bear markets are those which are usually in a declining state of sorts. Stock prices are seen to go down sharply during this time. This market is characterized by temporal stock price increases, following which it keeps falling lower and lower.

Going by the movement of global stock market indices in a bear market, it is seen that this market levels out finally at about a staggering 40% lower in comparison to its initial condition. This is a whopping decline and speaks volumes about investor sentiments and anxieties during such a cycle. This market goes hand in hand with a poor economy in most cases, fuelled by a steep rise in unemployment. Investments go down in scale and profits are lower for companies. This sparks devaluation of several company stocks and risk taking almost becomes nonexistent when it comes to stock market investments.

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