Breaking Down a Bear and Bull Market

Video Transcript

The stock market can be a place full of countless terms and a bunch of random jargon and two of the strangest terms that I've ever come across in my study of investing are bear market and bull market. So, let's break down what a bear and a bull market are and where those terms come from.

The price of stocks constantly changes, moving up and down throughout the day. But sometimes large chunks of the market can start to shift upward or downward for extended periods of time. The world of Finance decided that we need terms to describe these situations. The bear and bull market were born.

If the stock market increases by 20 or more from its most recent low point, we call that a bull market. If the stock market Falls by 20 or more from its most recent Peak, we call that a bear market.

You may be wondering why a bear and a bull; can we just pick another animal? There are several theories about where these terms come from but one possible answer comes from the way these animals could potentially fight.

A bear, being tall, would end up swiping down with their paws and that represents the downward movement in the price of a stock. Whereas a bull will strike upward with his horns and so it began to represent rising stock prices.