The terms “bear market” and “bull market” are commonly used to describe the overall trend of the stock market. A bear market is one in which the market steadily declines over time and investors are motivated to sell in order to stave off even bigger losses. This sometimes triggers a downward cycle that is difficult to overcome, as was the case with the Great Depression in the 1930s.
A bull market on the other hand, describes a market in which investment prices increase more rapidly than is typical. This usually involves high amounts of investor optimism and confidence. The U.S. experienced a bull market in the 1990s when stock prices rose dramatically.
The bear and bull market terms are used ubiquitously, but their exact origin is rather mysterious. As with many mysteries, numerous theories have emerged to explain where these terms came from. It seems the most prevalent explanation for the bear market term has to do with bearskin traders. As the story goes, bearskin traders who expected that prices would go down in the future would sell bearskins before the bears had actually been caught and killed. Eventually the term “bear” became synonymous with stock sold on speculation.
It's uncertain if this is the true origin of the bear term, but we do know that it was in use at least before 1720. That was when the South Sea Bubble scandal, which involved a considerable amount of stock sold by speculators, reached its peak in England. With this scandal, the bear market term gained prominence.
The most prevalent origin for the term bull market seems to be in response to the bear term. The first use was likely in the early 18th century. In 1720, Alexander Pope wrote, “Come fill the South Sea goblet full; The gods shall of our stock take care: Europa pleased accepts the bull, And Jove with joy puts off the bear.” A bull may have been chosen because of its contrast to the bear.
Over the years, these terms have been assigned other appropriate, if fictional, origins. For example, the fighting styles of these animals have been used to explain the terms. The bear swipes down at his prey, and the bull thrusts his horns upwards. Another explanation: bulls are thought to be more rambunctious and bears are hibernators.
Whatever the true etymology of these terms, they have shown real lasting power over nearly three centuries. They have also been spun off to refer to different types of investors. A bear investor is more pessimistic abou the market's future than a bull investor.
At the moment, the U.S. stock market is, of course, a bear market, with prices down virtually across the board. The market has experienced some price increases, however. These are called bear market rallies.
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