There are only two terms “Bullish” and “Bearish” we use while referring trend in market. We use bullish term when market is in uptrend and bearish when market is in downtrend . We have already seen ‘bull market ‘ in depth , here we are going to study about bear market.
Introduction to Bear Market
We use terms ‘bear’ , ‘bearish’ when stock prices are falling but main reason behind these when bear attacks something , he hits head to target by jumping ,this behaviour is similar to market in downtrend .
The situation when stock prices drops more than 20% from their recent highs , is called as bear market. Bear market term is not only used why referring stocks. But also any financial assets which are in downtrend such as gold, oil , real estates etc. Bear market can last for months ,but in some cases it lasts for years . It is a good opportunity to buy stocks for long term.
Reasons of Bear Market
Bear market occurs supply in market is greater than demand . When peoples are booking their profits . These conditions arises when market is overvalued . Main reasons for market corrections are as follows.
- Due to random factors such as War , natural disasters ,spread of diseases.
- Economical factors such as weak economic growth, high inflation , recession .
- Industrial factors such as low productions , worker strikes ,shortage of raw materials .
- Interest rate hikes , fed policies and government policies can also affect market.
Pros and Cons of Bear Market
- Short sellers can make good profits in bear market .
- Investors get chance to buy stocks at cheap prices .
- This corrections are healthy for market in long term.
- Markets bounces back faster after completion of bear market .
- Bear markets are very uncertain .
- They can last for months.
- Bear markets shows signs of recession.
- Investors loose huge amount of money in Bear market .
Recent Bear Markets
Bear market of March 2020 which was caused due to covid 19 . In this markets crashed for more than 50% from their highs . But good sign is they recovered more faster and reached all time highs after this .