Stock exchange lingo in layman’s terms – Part 3

Hello and welcome to the third instalment in this series about stock market lingo for newbies. Today we will be discussing how the battle between the bear and the bull has come to signify the tension of the stock markets of the world, and what we mean when we say the market is bearish or bullish.

History

Near the southern tip of Manhattan, you will find tourists congregating around a statue of a charging bull close to Wall Street and the New York Stock Exchange. Statues of a bear and a bull can be found outside the Frankfurt Stock Exchange in Germany. In Shenzhen in China, a large bull is depicted surrounded by smaller, cowering bears.

The history of this image is unclear but, according to the Merriam-Webster dictionary, the bear came first. More specifically, the proverb that warned it is foolish to “to sell the bear’s skin before one has caught the bear.” According to the Museum of American Finance, the term “bear” dates back to 1709. “Bear” at the time was short for someone who worked as a bearskin jobber, which entailed selling bearskins before catching the bear.

According to Investopedia, others have attributed the origin of these terms to how these animals attack. Bulls lower their heads and charge before flipping enemies into the air with their horns. Bears make themselves bigger before they attack, by standing up straight and swiping down at opponents with their sharp claws.

But what exactly do these terms mean?

Bull market

A bull market is when the stock market is growing for an extended period of time. The next time someone says the market is bullish, it is just another way of saying the market is increasing, and there are often more buyers than sellers. The bulls are people who are buying because they are expecting prices to rise. There is no official definition for a bull market, but the term is often used when the market rises by more than 20 per cent.

Bear market

This is the opposite. This is when markets are down for an extended period of time. So, if someone says the market is bearish, it means it is going down and there are often more sellers than buyers. Bears are those selling because they are expecting the price to drop.