You’ve probably heard the term “bear market” a lot lately — but what does it mean?
How does it differ from a bull market?
And why are we involving animals in all this?
Definitions, first
- Bear market: Prices are dropping.
- Bull market: Prices are rising.
How much? Usually, an increase or decrease of 20% or more from a recent high or low. So, right now, we’re in a bear market because the S&P 500 index closed at 3,749.91, down ~22% from its previous high of 4,818.62 in January, per CNBC.
While these terms are commonly used to refer to markets — the S&P 500, Nasdaq, and the Dow Jones Industrial Average — they can also refer to individual stocks or other assets.
Why the animals?
There are multiple theories for the terms’ origins. One is that it’s how they kill: bulls gore enemies by thrusting upward with their horns, while bears swipe down with their claws.
But a popular theory dates back to a proverb about not selling a bear’s skin before you’ve caught the bear.
In the 18th century, when someone sold something they didn’t yet own, hoping they could buy it later at a lower price, people would say they were a “bearskin jobber” who’d “sold the bearskin.”
- That term was further popularized after the South Sea Bubble, a financial crash in 1720 involving the South Sea Company, a trading company that turned out to be pretty worthless despite its once-soaring stocks.
And if that’s where the “bear” came from, another theory is that “bull” came about because people used to — ugh — make bulls and bears fight one another for entertainment.
