What are bull markets and bear markets?

Views 52KAug 23, 2023
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Key points

● A market that has shown an upward trend for a long time is a bull market, and a market that has shown a long-term downward trend is a bear market

● There are three stages of a bull market and a bear market. The end of a bear market is often the beginning of a bull market, and the end of a bull market is often the beginning of a bear market

● Be careful to choose good targets in a bull market, don't sell easily, and pay attention to late-stage selling signals; in a bear market, don't operate blindly; you can set a stop loss line, and pay attention to late-stage buying signals

● The main driving forces of the three-time bull market in Hong Kong stocks: improvements in economic fundamentals, restoration of valuations, improvements in capital, etc.

Detailed explanation of the concept

There are too many comments on the market about the origin of bull markets and bear markets; the real origin is no longer possible to examine. However, cows are often seen as a symbol of strength, while bears tend to give people the feeling of being bulky.

So it's easy to understand. Over a long period of time, market conditions continue to rise, and a market where asset prices generally rise is called a bull market. In contrast, over a long period of time, market conditions continue to decline, and a market where asset prices generally fall is called a bear market.

However, it is not that there will be a complete decline in the bull market, and there will also be a partial pullback; the bear market will not rise at all, and there will also be some rebound.

However, there is no clear standard for “how much is the rise/fall rate to count as a bull/bear market”; many people think this range is 20%.

Only by understanding the bull market and bear market and the risks and benefits they bring can we make rational investments and obtain satisfactory returns.

The different stages of a bull-bear market

A bull market and a bear market can usually be divided into three stages.

At the beginning of the bull market, a few people believed that the market would improve, and these investors began to buy; in the middle of the bull market, the market continued to rise, and most investors realized that the bull market had arrived; at the end of the bull market, everyone believed that a bull market had arrived, and market sentiment was extremely high.

In the early days of the bear market, a few people realized that the market would not keep rising, and these investors began selling; in the middle of the bear market, the market continued to fall, and most investors realized that the situation was getting worse; at the end of the bear market, everyone felt that the situation would only get worse, and market sentiment was extremely negative.

Yes, when everyone thinks a bull market has arrived, the bull market often comes to an end; when everyone thinks a bear market has arrived, the bear market is often almost over. Therefore, the end of a bear market is often also the beginning of a bull market, and the end of a bull market is also often the beginning of a bear market, but sometimes there is a volatile market with unknown direction between the two.

How to cross a bull bear

First, you can buy at the end of a bear market and sell at the end of a bull market. The highest point of a bull market and the lowest point of a bear market are difficult to predict, but it can be roughly determined that the end of a bear market and the end of a bull market can also earn most of the profits.

Second, in a bull market, we must pay great attention to selecting targets, so that we can obtain more profit. Once selected, don't sell easily to avoid missing out on better profit opportunities. However, it is important to pay attention to the signs of the end of the bull market, such as high trading volume but not moving, and too many newcomers around you entering the market one after another.

Third, in a bear market, if you're not professional or energetic enough, don't operate blindly. If you have an open position at the time, you can set a stop loss line and sell as soon as it is triggered. At the end of a bear market, or when there is a phased rebound over a long period of time, you can keep an eye on when to enter the market.

The above methods are for reference only. Only through continuous study and practice can you find the investment method that suits you.

Three major bull markets in Hong Kong stocks

How can you tell if it's a cow or a bear right now? There is no simple and uniform standard. It requires comprehensive consideration from economic fundamentals, financial aspects, technical aspects, and emotional aspects. Different people will have different judgments.

However, we can look at the recent three major bull markets in Hong Kong stocks to strengthen our perception and judgment about the bull market.

Hong Kong's economy recovered after the Asian financial crisis. Hong Kong's GDP growth rate changed from negative to positive in 1999 and reached 5% in 2000. The recovery in global GDP has also boosted Hong Kong's exports and consumption. Driven by the big bull market in US technology stocks, Hong Kong stock valuations have also returned to normal. The recovery of the economy and the return of valuations led to a bull market in Hong Kong stocks from August 1998 to March 2000. The Hang Seng Index rose by about 175% during this period.

From April 2003 to October 2007, Hong Kong stocks experienced another round of big bull market. During this period, the Hang Seng Index rose by about 276%. The main reason for this bull market is the economic prosperity of the Hong Kong region. Hong Kong's per capita GDP grew by 7.1% and 6.1% in 2005 and 2006, respectively.

At the end of 2016, the Shenzhen-Hong Kong Stock Exchange was launched, and capital for southbound Hong Kong stocks increased. In 2017, the prosperity of China's real estate industry rebounded sharply, and Hong Kong stock related sectors accelerated their rise. Since then, expectations for economic recovery have been getting stronger and stronger, and the US economy has been improving steadily. Also, undervaluations are gradually returning to normal. Increased expectations of economic recovery, the restoration of undervaluations, and an increase in southward capital led to a bull market in Hong Kong stocks from March 2016 to January 2018. The Hang Seng Index surged by about 70% during this period

Disclaimer: The above content does not constitute any act of financial product marketing, investment offer, or financial advice. Before making any investment decision, investors should consider the risk factors related to investment products based on their own circumstances and consult professional investment advisors where necessary.