What’s the Difference Between a Bull and a Bear Market?

Outside of the New York Stock Exchange in downtown Manhattan stands an 11-foot-tall, 7100-pound bronze form of a charging bull. For tourists, this sculpture is top photo op for their Instagram feeds, but for the brokers inside the exchange, the bull has a significant meaning. 

In finance, a “bull market” is one in which the value of tradeable assets—stocks, bonds, real estate, and currencies—is expected to rise, motivating investment. Because markets rise and fall all the time in a hard-to-predict pattern that French mathematician Louis Bachelier called the “random walk model,” financial analysts don’t declare the start of a bull market until stock prices have risen by 20 percent. Bull markets can be caused by numerous pro-investment factors, from low interest rates to decreasing unemployment and technological innovations. 

The opposite of a bull market is the “bear market”—one in which the value of tradeable assets falls by 20 percent. If bull markets are generated by factors that favor investment, bear markets are caused by situations that deter investment, like high interest rates, rising unemployment, or trade-deterring tariffs. 

The Origins of Bull and Bear Markets 

At a glance, the naming convention doesn’t seem to make a lot of sense. Both bulls and bears are aggressive animals, known to charge at their prey or threats without much hesitation. How these now-ubiquitous terms originated is unclear, but several theories have been reported.

A story published by NPR suggests the terms may trace back to 18th-century London and the brutal but popular sport of bear- or bull-baiting, in which dogs attacked chained bears or bulls and spectators placed bets on the winning animal. 

People who watched this sport, the story goes, noticed that the chained animals defended themselves in different ways: bears by swiping downward with their paws, bulls by swinging their horns upwards. 

That’s one theory. Another, according to by Merriam-Webster, suggests the term bear market emerged first, evolving from an 18th-century proverb that may have originated among fur trappers: “Don’t sell the skin until you have caught the bear.” Along this line, Anglo-Irish writer and playwright Richard Steele wrote in The Tatler in 1709, “I take the meaning [of bear] to be, that one who ensures a real value upon an imaginary thing, is said to sell a ‘bear.’”

Bull market may also have evolved in direct relation to economic trends, describing a speculative purchase in the expectation that the value of the purchased would rise. It use likely stemmed from the South Sea Bubble, a complicated financial scandal in which British officials inflated the value of publicly-owned shares invested in the government’s empire-building activities. One of the investors, the poet Alexander Pope, wrote, “Come lift the South Sea goblet full / The gods shall of our stock take care / Europa pleased accepts the Bull / and Jove with joy puts off the Bear.” When the bubble burst in 1720, however, hundreds of investors were ruined.

Regardless of where and how these two terms originated, time has divested them from their zoological origins. In the financial world today, few actually picture a bear or a bull when the stock market opens—only graphs shooting up or down.

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