Three stages of bull and bear markets!

The bull and bear markets of the stock market are traditional indicators of the business cycle. As an investor, distinguishing bull and bear markets in the stock market and grasping the long-term development direction of the market can avoid the impact of short-term market fluctuations and the impact of complex market information. 

For example, the market fluctuations brought by news information, the sudden and sharp drop in market prices, and the impact of investor sentiment have led to making wrong investment trading decisions.

The stock market is in a bull market, most asset prices will continue to rise, and the stock market is in a bear market, most asset prices will continue to fall. Both bull and bear markets are divided into three stages, so how to tell whether the stock market is in a bull or bear market, and at what stage.

S&P500 Index

What is a bull market?

In the first stage of the bull market, after the market economy was in recession, the stock price fell to a very low position and the transaction volume was very small, but the market economy began to improve. 

Value investors believed that the value of the stock was undervalued, and market capital began to enter the stock market. Buying undervalued assets, stock prices started to rise, but at this time most investors still do not believe that the market economy has recovered and market sentiment is still pessimistic. 

In the second stage of the bull market, after the stock price rose for some time, the market continued to announce favorable news. Investors began to restore confidence in the market economy. With the increase of market economic value and optimistic market sentiment, investors continued to enter the stock market to buy Into assets, stock prices continue to rise, and trading volume continues to rise.

 In the third stage of the bull market, the market economy grew excessively, investors were confident about the market economy prospects, market sentiment was extremely optimistic, funds went into the stock market crazy to buy assets, stock prices continued to hit new highs, and trading volume was active.

S&P500 Index

What is a bear market?

The first stage of the bear market appeared at the end of the third stage of the bull market, the market economy began to decline, and the stock price had risen to a very high position. The over-inflation of asset prices caused the value of stocks to be greatly overvalued. Value investors began to sell stocks, and stock prices began to fall. 

In the second phase of the bear market, more and more investors are beginning to realize that the economy has already declined, the market keeps publishing unfavorable news, market sentiment is panic, investors are constantly rushing to throw stocks, and stock prices are falling rapidly. In the third stage of the bear market, stock prices fell sharply, and market investment sentiment was extremely pessimistic. 

Investors all threw out stocks, and stock prices fell to a very low position. With the recovery of the market economy, value investors have started to buy undervalued assets, funds have begun to enter the stock market, and a new round of bull market will begin.

There is no identical bull market, nor is there an identical bear market. If investors know which economic cycle they are currently in and how to distinguish between the characteristics of bull and bear markets, they can make correct investment trading decisions when stock prices are rising or falling too much. The growth and decline of the market economy will create opportunities for us to buy or sell assets.