What's the Deal with Bears and Bulls?
Why indeed! You'll see that I use the bear and bull element throughout GradMoney and there is a big reason for that: they are some of the most recognizable figures in all of finance. On Wall Street, we use these two animals as metaphors for a deeper struggle of growth and recession. If you have not heard of these terms already, you will once you start to invest and read investing-related articles.
But something that I had always wondered was why did they choose those two animals to represent market actions? Both animals are equally intimidating and strong, and you bet you'd never catch me in a tight space with either one! But here are some fun facts that I took the liberty to find for you (a big thanks to the details found on Investopedia):
What Does Each Represent And Why?
Bears and considered "sluggish" and bulls are considered "spirited" and "burly." These are the terms used to describe general actions and attitudes, or sentiment for either an individual investor, or the stock market. A bear market refers to a decline in prices, usually for a period of a few months, in a single security or asset, group of securities or the securities market as a whole. A bull market is the opposite - when prices are rising.
A bull market is when everything in the economy is great, people are finding jobs, gross domestic product (GDP) is growing, and stocks are rising. Things are just plain rosy! Picking stocks during a bull market is easier because everything is going up. Bull markets cannot last forever though, and sometimes they can lead to dangerous situations if stocks become overvalued. If a person is optimistic and believes that stocks will go up, he or she is called a "bull" and is said to have a "bullish outlook".
A bear market is when the economy is bad, recession is looming and stock prices are falling. Bear markets make it tough for investors to pick profitable stocks. One solution to
this is to make money when stocks are falling using a technique called short selling. Another strategy is to wait on the sidelines until you feel that the bear market is nearing its end, only starting to buy in anticipation of a bull market. If a person is pessimistic, believing that stocks are going to drop, he or she is called a "bear" and said to have a "bearish outlook".
Where Did The Terms Originate?
It is not known for sure where the terms originated but there are two major theories about how we arrived at using these animals to describe the stock market:
The terms "bear" and "bull" are thought to derive from the way in which each animal attacks its opponents. That is, a bull will thrust its horns up into the air, while a bear will swipe down. These actions were then related metaphorically to the movement of a market: if the trend was up, it was considered a bull market; if the trend was down, it was a bear market.
Historically, the middlemen in the sale of bearskins would sell skins they had yet to receive. As such, they would speculate on the future purchase price of these skins from the trappers, hoping they would drop. The trappers would profit from a spread - the difference between the cost price and the selling price. These middlemen became known as "bears", short for bearskin jobbers, and the term stuck for describing a downturn in the market. Conversely, because bears and bulls were widely considered to be opposites due to the once-popular blood sport of bull-and-bear fights, the term bull stands as the opposite of bears.