Bullish and bearish are terms to describe a stock or the entire stock market’s movement in prices. Find out the key differences.
Bullish or bull market
A bullish investor believes that the price of a stock will go up. You can be bullish on a single stock or the entire stock market. This can also be short-term or long-term.
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The terms bullish and bull both refer to the opinion or belief that the price will increase.
You may become bullish on a stock if you hear the news that the economy is doing well, employment levels are high, a company has strong earnings or other reasons that may cause the price of a stock, bond, or commodity to increase.
If you buy a stock because you believe that it’s currently undervalued, that means you’re bullish on that stock. You’re predicting that the price will go up as it reaches fair value or even being overvalued.
Being bullish on the entire stock market means you believe that the current stock market is a bull market. It refers to an index, such as the S&P 500 or Dow Jones Industrial Average.
You may not believe that every stock will increase in price. However, you believe that the index as a whole will go up. During a bull market, investors are optimistic and confident.
Bearish or bear market
The opposite of being bullish or is being bearish. If you believe that the prices of stocks, bonds, currencies, or commodities will go down, you’re a bearish investor.
Being bearish may come from an unfavorable outlook of financial markets, the economy, unemployment, or the belief that companies are greatly overvalued.
Bearish investors may sell their investments or short stocks, which means that they’re betting that the price of a stock will drop.
A bear market means that an index is declining. It’s characterized by a 20% or more drop in a stock or index over several weeks or months. It can last weeks, months, and even years.
Some investors look forward to a bear market because it’s when they purchase stocks. They’ll have a bullish stance on the stock because they believe it’s undervalued.
During a bear market, many investors will become pessimistic, fearful, and trading volume may decrease.
Frequently asked questions
Do you buy or sell in a bullish market?
If you buy stocks early in a bullish market and sell them when they reach their peak, you’ll make a profit. The key is to take advantage of the rising prices and buy stocks early.
What’s the longest bull market in history?
The longest bull market started in March 2009 and is still going on today.
What’s the longest bear market in history?
The longest bear market lasted just over two years. It started in 2000 after the dot-com bubble burst.
What’s the 3-day rule for stocks?
The 3-day rule states that you should wait three full days before purchasing a stock after it’s been hit with negative news. The goal is to minimize losses and increase profits.
As an investor, understanding the differences between a bull or bear market is important. You’ll be able to make informed decisions regarding your investments because you’ll know what the market is or has been doing.
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About David Em
David Em is the founder of More Money More Choices, which he launched to help you take control of your finances and build your dream life. Before More Money More Choices, David worked in leadership positions in the finance industry.