Have you ever heard the terms Bulls and Bears tossed around on wallstreetbets and wonder what that even means? Well, it’s pretty simple.
In essence, Bull and Bear refers to the current market conditions.
A Bull market is a market where the economy is sound, things are on the rise, things are looking good and stock prices and equities increase as a result.
Bear markets, on the other hand, are ones where economies are receding or on a downturn and most stocks are declining in value.
We can use the labels to refer to not only market conditions but the type of investor you are as well.
If someone is Bullish, they believe that the market is going to continue to rise.
Whereas, if someone is Bearish, they believe that stocks and equity prices will decline in the future.
Why is this important?
Knowing the current market conditions will help you identify your own stance.
In a Bull market there is strong demand and weak supply for securities.
Strong demand means that more people are looking to buy stocks. Investors are willingly going to participate because they believe stock prices will go up.
In a Bear market, however, the opposite is true.
In a Bear market more people are looking to sell their positions, take the profit off the table and ultimately move that money to safer investment vehicles.
So, which should I be?
Now for the real question….should you be a Bull or a Bear?
Tough question because at the end of the day they’re at odds with each other.
They’re contradicting viewpoints, so how do you pick?
Well, ultimately, it’s probably better to be a bull.
The stock market as a whole has tended to post positive returns over long term time horizons. Or in other words “stonks only go up”
So, being a bull has the mathematical edge.
However, there are times when you should be bearish.
It’s never good to be a perma-bull or a perma-bear. It’s more important to read market conditions, figure out what market sentiment is and establish positions based on that.