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Compare and contrast a bear market and a bull market.

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Michael Koren eNotes educator | Certified Educator

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A bull market and a bear market are two kinds of events that can occur in the stock market. Both will impact investors.

During a bull market, the stock market will rise over a period of time. This usually indicates that investors feel good about the direction our economy is heading.

In a bear market, stock prices are falling over a period of time. This usually indicates that people are concerned about the direction our economy is going.

In both markets, people can make or lose money. If people panic during a bear market, they may sell their stocks too soon and lose money on their investment. If people jump into the stock market during a bull market, they may pay too much for the stock and end up selling it for a loss if the price of the stock drops.

During a bear market, a person might be able to get a stock at a low price. If they buy it at a low price and sell it during a bull market, they could make money on the stock. Bullish and bearish are two terms used to describe the attitudes of investors regarding the stock market.

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tjbrewer eNotes educator | Certified Educator

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During a Bull market:

  • Stock prices rise in the long term
  • Inflation is stable, controlled
  • Interest rates decline
  • Bond prices rise in inverse relationship to interest rates
  • Economic indicators are strong and positive

During a Bear market:

  • Stock prices fall in the long term
  • Inflation rises quickly
  • Interest rates rise
  • Bond prices decline in inverse relationship to interest rates
  • Economic indicators are weak and negative with recession and high unemployment

During both markets:

  • Investors can still make money by wisely investing, e.g., in bonds during bear and stocks during bull markets.
  • There are investments that defy the general trend (i.e., some stocks rise during a bear market and some fall during a bull market because stock price is still related to company performance within the market). 

Bull and Bear Markets