Bullish vs. Bearish Markets: A Comprehensive Guide

Professionals in corporate finance regularly refer to markets as being bullish and bearish based on positive or negative price movements.  A bear market is typically considered to exist when there has been a price decline of 20% or more from the peak, and a bull market is considered to be a 20% recovery from a market bottom.

Bullishness is a sentiment or mindset adopted by a traderSales and Trading Career ProfileThe sales & trading division (S&T) of an investment bank helps mutual funds, hedge funds, pension funds, etc. facilitate equities transactions (buy/sell). A career in sales & trading can be extremely strenuous with a very fast paced environment. The competition for positions is intense, compensation can be very high,, thinking securities will move up in price. The opposite of this is bearishness, which is the sentiment that securitiesMarketable SecuritiesMarketable securities are unrestricted short-term financial instruments that are issued either for equity securities or for debt securities of a publicly listed company. The issuing company creates these instruments for the express purpose of raising funds to further finance business activities and expansion. and markets are likely to move down in price.

Term Usage

When a trader says he is bullish on Apple Inc. (AAPL) shares, it means the trader thinks AAPL shares will move up in the future.

The terms bullish and bearish can also be used to describe a trend or movement that has already happened. For example, if APPL shares have made a drastic move down from $200 to $100 after an earnings call, one may say that the stock has been bearish for the week.

While the most common use of the term is in the stock market, these terms do not necessarily apply only to stocks. The terms can also be used when thinking about investments in the real estate sector, the commodity markets, and other investment arenas.

Hawkish and Dovish

When discussing changes in interest rates, people don’t generally use the term bullish. Instead, the term “hawkish” is used. When labeling a group of Central Bank officials, for example, who are inclined to raise interest rates, they are called hawkish rather than bullish. On the other end, the equivalent of bearish in regard to interest rates is dovish.

Changing views

These terms are just sentiments, and a trader can shift from bullish to bearish in the blink of an eye when they feel the market situation has significantly changed. When an economist is bullish on the general economy, it does not necessarily mean the prices of stock securities will move up.

A good example of this was the subprime mortgage crisis in 2008. Research analystsEquity Research AnalystAn equity research analyst provides research coverage of public companies and distributes that research to clients. We cover analyst salary, job description, industry entry points, and possible career paths. mentioned strong bullishness, citing that the Dow Jones Industrial Average was ready to reach a record high, but instead, prices fell. Analysts maintained the bullish view until the situation was gloomy enough for them to shift to a bearish view.

Additional resources

Thank you for reading this CFI guide to bullish and bearish markets. To continuing learning and advancing your career, CFI highly recommends these additional resources:

• Investing guide for beginnersInvesting: A Beginner's GuideCFI's Investing for Beginners guide will teach you the basics of investing and how to get started. Learn about different strategies and techniques for trading
• Finance career map
• What is financial modelingWhat is Financial ModelingFinancial modeling is performed in Excel to forecast a company's financial performance. Overview of what is financial modeling, how & why to build a model.
• Free finance courses