Aabhash Gautam is substituting for Srinjay Saayan Verma, as you may have noticed from the public schedule. Srinjay Verma was unable to communicate with the club because he was unable to copy-paste into a Google doc and was busy working at his internship at Quip with Bret Taylor and math at UC Davis. We apologize if you were waiting to see one of Srinjay Verma’s first few blogs, and he should be back next week. Meanwhile, enjoy this blurb from Aabhash!
– Editor
Almost all investors are aware of the terms “bull” and “bear” when describing markets and investor confidence. However many are unaware of the origin of these terms.
When a market is bullish, it is on the rise. Bull markets are characterized by rising prices, an expectation for continued success in the market, and investor optimism.
A bear market, on the other hand, is defined by widespread investor pessimism. It can be defined as the complete opposite of a bull market. Bear markets are characterized by falling prices, continued selling, and a belief that the downward trend will continue.
In technical terms, there are also specific conditions that define each market. A bull market usually occurs when broad market indexes, such as the S&P 500 and the DJIA (Dow Jones Industrial Average), have increased by 15-20% over a period of two or more months. Likewise, entry into a bear market usually occurs when major indexes have decreased by 15-20% over a period of two or more months.
Nonetheless, why is it that we use the terms “bull” and “bear” to describe markets? Well, there are a vast number of theories. The most widely accepted origin of the terms relies on the methods each animal uses when they attack. A bull usually attacks with its horns striking upward at its enemies. On the other hand, bears usually claw downward when attacking their enemies. The direction each animal attacks is similar to the market conditions each term describes. Bull markets experience upward trends, just like how a bull attacks upward. Bear markets experience downward trends, just like how a bear attacks downward. Wall Street is as animalistic as some say, for better or worse.
– Aabhash Gautam