Understanding the basics of bull and bear markets

The market swings like a pendulum between the two extremes - the bull and the bear market. The bull market is characterised by rising share prices; these are the days you want to check your portfolio. And the bear market is when share prices fall dramatically; that's when you put your phone aside. In this article, we'll explain the basics of each market phase to help you navigate them better. What is a bull market? A bull market refers to a prolonged period of rising stock prices, typically defined as a 20 per cent or more increase from recent lows. This period is marked by optimism, high investor confidence, and strong economic indicators, all of which contribute to sustained growth in the stock market. Basics of a bull market During a bull market, the economy typically enters an expansion phase, marked by rising corporate earnings, strong GDP growth, and low unemployment. With more people employed, disposable income increases, putting more money in the hands of the average consumer. This leads to higher demand for goods and services, which, in turn, drives business revenue and earnings growth. As companies report better financials, share prices often rise in response. Investor optimism about future growth fuels market participation, attracting more buyers. This increased demand can push stock prices even higher, resulting in premium valuations. In some cases, even companies with weak fundamentals may see their stock prices soar due to the prevailing market optimism. Phases of a bull market A bull market typically unfolds in three phases: Accumulation phase : Early investors - typically institutions or seasoned investors - start buying stocks at lower prices. At this stage, many market participants remain cautious or sceptical. Public participation phase : As the market continues to rise, retail investors begin to buy in, attracted by rising stock prices and the optimism surrounding the

This article was originally published on May 14, 2025.