Too embarrassed to ask: what are “bulls” and “bears”?

Two common terms you’ll hear when reading about markets are “bulls” and “bears”. But what do they mean? 

If you ever tune into financial commentary, two of the most common terms you’ll hear are “bullish” and “bearish”. But what do they actually mean, and where on earth do they come from? 

The definitions are very simple. A bull market is a rising market. So if you are bullish on an asset or a market, it means you think the price will go up. If a news item or economic data point is described as bullish for the market, then it’s seen as something that will drive prices higher.  

A bear market is a falling market. So if you are bearish, it means you think the price of an asset or market will go down. And if a news item is bearish for a stock or for the market, it’s seen as something that will drive prices lower. 

A very loose definition of a bull market – in other words, a market that is viewed as being on the rise more generally – is one that has risen by more than 20% from its most recent low. A similar definition – but in the opposite direction – applies to bear markets. To be clear, there is nothing especially significant about the figure of 20% – it’s just a big number. 

Some market analysts argue for more thoughtful definitions of bull and bear markets that take into account underlying conditions and span a wider period of time. These are sometimes known as “secular” or “structural” bull or bear markets.  

So that’s pretty simple. Bulls are optimistic about asset prices, while bears are pessimistic.  But where do the terms come from? No one really knows for sure. But one theory is that they come from a rather grisly bloodsport – popular in both Elizabethan England and gold rush era California – in which a bull would be pitted against a bear. Spectators would bet on the outcome. Thus you have ”bulls” versus “bears”. In this case, bulls represent a rising market, because when bulls attack, they thrust their horns upwards, whereas when bears attack, they claw downwards. 

A related theory is that the term “bear” originated with the market for bearskins. Middlemen in the trade would sell skins before they’d bought them from trappers. In effect, they were short-selling. Hence the term “bear” – with its opposite being “bull”. 

For more on bull and bear markets, subscribe to MoneyWeek magazine.

Recommended

Early repayment charges: should you abandon your fixed-rate mortgage for a new deal now?
Mortgages

Early repayment charges: should you abandon your fixed-rate mortgage for a new deal now?

Increasing numbers of homeowners are paying an early repayment charge to leave their fixed-rate mortgage deal early, and lock in a new deal now. Shoul…
30 Sep 2022
Energy meter reading day: why you need submit your gas and electricity readings now
Personal finance

Energy meter reading day: why you need submit your gas and electricity readings now

Energy meter reading day - you need to submit your gas and electricity readings as soon as possible ahead of the October energy price increase
30 Sep 2022
Should you fix your mortgage? Here are the best rates available now
Mortgages

Should you fix your mortgage? Here are the best rates available now

Rising interest rates look set to spring a nasty surprise on millions of homeowners next year. You need to take steps today to protect yourself from a…
30 Sep 2022
Why the Bank of England intervened in the bond market
Government bonds

Why the Bank of England intervened in the bond market

A sudden crisis for pension funds exposed to rapidly rising bond yields meant the Bank of England had to act. Cris Sholto Heaton looks at the lessons …
30 Sep 2022

Most Popular

Why everyone is over-reacting to the mini-Budget
Budget

Why everyone is over-reacting to the mini-Budget

Most analyses of the chancellor’s mini-Budget speech have failed to grasp its purpose and significance, says Max King
29 Sep 2022
How the end of cheap money could spark a house price crash
House prices

How the end of cheap money could spark a house price crash

Rock bottom interest rates drove property prices to unaffordable levels. But with rates set to climb and cheap money off the table, we could see house…
28 Sep 2022
Why UK firms should start buying French companies
UK stockmarkets

Why UK firms should start buying French companies

The French are on a buying spree, snapping up British companies. We should turn the tables, says Matthew Lynn, and start buying French companies. Here…
28 Sep 2022