Wall Street’s Bears Come Back in Style

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Why is it called a bull or bear market?

The term “bull market” refers to a stock market that has been rising; a “bear market” is one where prices have been falling. In both cases, the zoological terms tend to kick in when prices rise or fall by 20% or more. When it comes to individual investors, a “bull” expects stocks to rise, while a “bear” acts on the assumption they will fall.

How did all these animals get into finance?

The historical record is pretty clear: The bear came before the bull. Most evidence suggests it originated with a proverb that cautions against the temptation to “sell the bear’s skin before one has caught the bear” (sort of like counting your chickens before they hatch, but with a lot more gore).

By the 18th century, the phrase “bear-skin jobber” had become a pejorative for sellers, especially the disreputable ones who actively bet that prices will fall. “Thus every dissembler, every false friend, every secret cheat, every bear-skin jobber, has a cloven foot,” Daniel Defoe wrote in 1726. The term was popularized during the one of the world’s first huge market crashes, the South Sea Bubble of 1720.

There’s less historical evidence for the rise of the term “bull,” but it seems to have been chosen for its symbolic opposition to the bear.

Some people say the terms refer to the ways the animals attack their prey: Bears swipe downward with their paws while bulls thrust upwards with their horns. Poetic, but there’s no real evidence that the metaphor had anything to do with the terms’ original use in a markets context. An entirely different theory, which discounts the whole bear-skin jobber business, says the terms come from the early London stock exchange, when traders would fill a bulletin board with “bulls” (that is, bulletins) during times of volatile trading, while in slow markets the board would be bare.

Though the terminology’s origins are murky, there is one reason these two animals lived side by side in the popular imagination just as they were gaining prominence as market terms: the barbaric British pastime of watching a team of dogs fight a wild animal. Going back to medieval times, but especially in the 16th and 17th centuries, people thought it was excellent sport to chain a bear in a pit and then unleash dogs on it, until either several dogs were killed or the bear was mauled into submission (not death, though; bears were expensive to import). Dogs were also made to fight rats, badgers, roosters, and cruelly creative configurations like apes tied to ponies. But next to bears, bulls were particularly popular, favored for the moments of drama when they tossed dogs into the air with their horns.

Where Did the Bull and Bear Market Get Their Names?

The terms “bear” and “bull” are often used to describe general actions and attitudes, or sentiment, either of an individual asset or the market as a whole.

A bear market refers to a decline in prices, usually for a few months, in a single security or asset, group of securities, or the securities market as a whole. In contrast, a bull market is when prices are rising. Typically a move of 20% or more from a recent peak or trough triggers an “official” bear or bull market.

Key Takeaways

  • A bull market is a market that is on the rise and is economically sound, while a bear market is a market that is receding, where most stocks are declining in value.
  • The actual origins of these expressions are unclear, but one reason could be that bulls attack by bringing their horns upward, while bears attack by swiping their paws downward.
  • A second explanation relates to early stock market participants and how they could benefit from either an up or down trend.

Where Did “Bulls” and “Bears” Come From?

The actual origins of these expressions are unclear. Here are two of the most frequent explanations given:

  1. The terms “bear” and “bull” are thought to derive from the way in which each animal attacks its opponents. That is, a bull will thrust its horns up into the air, while a bear will swipe down. These actions were then related metaphorically to the movement of a market: if the trend was up, it was considered a bull market; if the trend was down, it was a bear market.
  2. Historically, the middlemen in the sale of bearskins would sell skins they had yet to receive. As such, they would speculate on the future purchase price of these skins from the trappers, hoping they would drop. The trappers would profit from a spread—the difference between the cost price and the selling price. These middlemen became known as “bears,” short for bearskin jobbers, and the term stuck for describing a downturn in the market. Conversely, because bears and bulls were widely considered to be opposites due to the once-popular blood sport of bull-and-bear fights, the term bull stands as the opposite of bears.

Literary Evidence for Bear

According to MiriamWebster.com, the term “bear” came first. “Etymologists point to a proverb warning that it is not wise “to sell the bear’s skin before one has caught the bear.” By the eighteenth century, the term bearskin was being used in the phrase “to sell (or buy) the bearskin” and in the name “bearskin jobber,” referring to one selling the “bearskin.” Bearskin was quickly shortened to bear, which was applied to stock that was being sold by a speculator and the speculator selling stock.”

I fear the word “bear” is hardly to be understood among the polite people; but I take the meaning to be, that one who ensures a real value upon an imaginary thing, is said to sell a “bear”.

—Richard Steele, The Tatler, 1709

Thus every dissembler, every false friend, every secret cheat, every bear-skin jobber, has a cloven foot…

—Daniel Defoe, The Political History of the Devil, 1726

Others have claimed that the word bear is used based on the downward clawing motion an bear makes when attacking.

Literary Evidence for Bull

“The term bull originally meant a speculative purchase in the expectation that stock prices would rise; the term was later applied to the person making such purchases. The animal seems to have been chosen as a fitting alter ego to the bear.” Thus poet Alexander Pope wrote in 1720:

Come fill 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.

Some have claimed that the word bull is used based on the upward thrusting motion a bull makes when attacking with its horns.

Stock Market Menagerie: Bulls vs. Bears, Unicorns, & the Animals of Wall Street

Animal terms and animal references are prominent among Wall Street slang terms. Here’s a look at bulls and bears, hawks and doves, cats and dogs, sheep and pigs, and even black swans and unicorns.

Key Takeaways

    Bulls, bears, and other Wall Street animal refences have been around since the market’s earliest days

Understanding various animal-based market terms can help investors analyze price action

  • Wondering how to distinguish between a “dead cat bounce” and a true price reversal? Consider technical patterns
  • Someone turning on the financial news for the very first time might get the impression that Wall Street isn’t a market but rather an animal parade: bulls and bears, hawks and doves, dead cats and doomed sheep, and so on. Stock market animal references reach back to the early days of Wall Street. But what exactly does all the animal-based market slang mean?

    Zoological-sounding stock market phrases abound in financial market coverage, in part reflecting our country’s agrarian roots. Wall Street slang also helps simplify complex industry ideas into a commonly understood vernacular. Still, investors shouldn’t just take these terms at face value. It’s important to define and understand bull markets, bear markets, and other Wall Street animals.

    Here’s a brief primer on Wall Street animal slang.

    Charging Up and Forward: Bulls and Bull Markets

    Bulls are considered optimistic on stock prices or the overall market and therefore may be buying, or “going long.” Bull markets are typically defined as a period of sustained, fundamentally driven growth in share values, although it’s not always certain when a bull market began until years later (the ongoing bull market in U.S. stocks started in early 2009, based on benchmarks such as the S&P 500 Index).

    Bull markets “are typically associated with a strengthening economy, an increased demand for securities, and widespread positive investor sentiment,” said Ryan Campbell, senior content producer at TD Ameritrade.

    The origin of the term “bull” isn’t clear, although real bulls—adult male cattle—can have sharp, upward-pointing horns and can be aggressive, hard-charging, and powerful. The term “bull” was used in association with the markets as early as 1714, according to the Museum of American Finance.

    Real Downers: Bears and Bear Markets

    In contrast to bulls, bears tend to be pessimistic and expect stocks to decline, and they may sell shares they’ve been holding. Bearish traders may also “short” stock by selling borrowed shares they intend to buy later at a lower price, looking to pocket the difference at a profit.

    A bear market is commonly defined as a drop of 20% or more and may “coincide with a weakening economy, significant liquidation of securities, and widespread negative investor sentiment,” Campbell said.

    Market historians believe “bears” arrived on Wall Street before “bulls.” The bear term dates to around 1709, when it was used as shorthand for the “bearskin jobber” occupation and may have referred to the practice of “selling bearskins before catching the bear,” according to the Museum of American Finance (kind of like what short sellers do today).

    Another theory holds that bull-versus-bear symbolism originated in London around the time of the 1853–56 Crimean War, in which Britain, personified in political cartoons as “John Bull,” fought Russia, often represented as a bear, according to Liberty Street Economics, a blog published by the New York Federal Reserve. (Russia lost the war.)

    Not Flocking Together on Interest Rates: Hawks and Doves

    In financial markets, “hawkish vs. dovish” typically refers to opposing approaches toward interest rates and Federal Reserve monetary policy. A hawk, or someone who’s “hawkish,” probably favors keeping benchmark short-term interest rates relatively high and the money supply relatively “tight” to keep inflation down.

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    If you’re a dove, or you’re “dovish,” you likely favor “easier” monetary policy and lower interest rates in hopes of stimulating the economy.

    Flyover Country: Butterflies and Condors

    Animal lingo isn’t limited to stocks. Several options strategies are named for winged creatures. Butterfly spreads, condors, and iron condors are among options strategies that aim to profit through the passage of time or through changes in volatility (or lack of change).

    A long butterfly spread, for example, uses options contracts based on a 1:2:1 ratio, where the single options on the outside are long positions, or the “wings,” and the two options in the middle are short, making up the “body.” The shapes of their risk profile graphs resemble winged creatures, with the butterfly having a more pointy head than the condor or iron condor.

    Appetite for Destruction: Sheep and Pigs

    Investors lacking discipline, focus, or strategy, who may blindly follow the herd without thinking independently or critically, are sometimes derisively called “sheep.” They’re considered late to market moves and vulnerable to bad advice, in contrast to more seasoned market professionals. Sheep “get slaughtered,” as one Wall Street axiom goes.

    “Pigs” convey a similarly negative image: greedy, undisciplined investors who are also poised to “get slaughtered” by the market. As JJ Kinahan, chief market strategist at TD Ameritrade, put it—paraphrasing a Wall Street adage—“Bulls make money. Bears make money. But hogs get slaughtered.”

    Nature vs. Nurture: Turtle Traders

    Can humans be taught to trade successfully, or is that a special gift some people are born with? That was a central question in a 1980s experiment led by legendary commodities trader Richard Dennis and his partner, William Eckhardt.

    A basic premise in “turtle trading” is that markets move in identifiable trend patterns, including uptrends (bull markets), downtrends (bear markets), or neutral trends (range-bound markets). Ergo, “the trend is your friend.” Dennis was widely regarded as a trend-following trader, and he believed his experiment results proved that trading is a skill that can be taught.

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    Markets Brought to Heel: Dogs and Dead Cat Bounces

    Man’s best friend? Not on Wall Street. “Dogs” are stocks considered to be poor performers or underperformers compared with industry peers or the broader market.

    Cats are also represented. A slumping stock may see a “dead cat bounce” that turns out to be little more than a temporary respite or head-fake before the downtrend resumes (as the saying goes, even a dead cat would bounce slightly if dropped from a sufficient height; some trace this expression to 1980s British financial markets).

    How can traders distinguish between a dead cat bounce and a potential actual price reversal? Some people study technical patterns on stock charts for “confirmation” signals.

    Dark Days: Black Swan Events

    Perhaps the scariest animal in the Wall Street zoo, black swan applies to outlier, extreme-impact events that people know can happen, yet are never prepared for. The 2008 collapse of Lehman Brothers, the May 2020 “Flash Crash,” and the 2020 Brexit vote are considered black swans. The term was popularized by Nassim Nicholas Taleb, a finance professor, writer, and former Wall Street trader, in his 2007 book The Black Swan: The Impact of the Highly Improbable.

    A black swan event is very difficult to predict. But there are steps investors can take to prepare for market turmoil and insulate their portfolios. For example, keep an eye on indicators such as Treasury yields or the Cboe Volatility Index (VIX) for signs of escalating concern among market professionals. The VIX, known as the “fear gauge,” often spikes higher during periods of market or political tumult.

    Bonus Animal: Imagination Running Wild with Unicorns

    We’ll close this journey through the stock market zoo with an animal outside the real world: the unicorn.

    A relatively new term, a “unicorn” is a privately held startup company, often in the tech industry, valued at more than $1 billion and potentially destined for even greater riches after an initial public offering (IPO). In recent years, some of these unicorn companies have indeed held IPOs to much fanfare, only to see their shares sag. Could a hot new ride-hailing company or social media platform actually turn profitable and become a solid, long-term investment? Or are unicorns just a myth? Perhaps a little of both?

    What Does the Bull and the Bear Mean in the Stock Market?

    Wall Street symbolizes ups and downs of stocks with bulls and bears.

    Hemera Technologies/AbleStock.com/Getty Images

    Wall Street has its own mythology. You often hear a commentator say that the bears are in charge or that the bulls have taken over. Analysts like to say they are “bullish” or “bearish” on the market or on a particular stock. This has become so common that few people ever stop to explain what these terms mean. The meanings are simple and easy to remember.

    Defining a Bull Market

    In a bull market, stocks show a tendency to go up in price over a period of time. This period can be weeks, months or years. Typically, the average length of a bull market is approximately 97 months. It’s not an exact term. Instead, it refers more to confident sentiment among investors. In practice, it means the market has more buyers than sellers. When demand exceeds supply, prices rise. Bull markets are most common when the economy is growing, unemployment is low and inflation is somewhat tame. When someone says he is “bullish” on a single stock, he simply means he expects it to rise in price.

    Defining a Bear Market

    When someone says we’re in a bear market, she believes stocks are headed down. This means sellers outnumber buyers. Historically, bear markets have been shorter in duration than bull markets, with an average length of 18 months. If stocks go down for just a few days or weeks, the movement is usually called a “pullback” or a “correction.” Once stocks drop 20 percent from their peak in value, you may hear speculation that it is a bear market, meaning it could drop a lot further before it comes back up.

    Some investors actually make money, particularly late in a bear market, buying stocks with depressed values in anticipation of them rising again. The process known as stock shorting involves selling stocks at a current price with the aim of buying them back once they reach a lower price. However, this is extremely risky given the fact that a short seller must ultimately buy the stock back, perhaps at a higher price. This could be catastrophic in the event that stocks defy bear market standards and raise exponentially in value, forcing the short seller to pay a tremendous sum to buy back the shares that he has sold short.

    The Source of the Names

    Miners used to actually pit bears and bulls together in a fighting ring. In the United States, this was common during the Gold Rush era in California. This bloody sport eventually was outlawed, but the symbolic strength of the two animals translated into modern Wall Street usage. As for the “up” and “down” parts, some claim this is a reference to the bull’s tendency to slash upward and the bear’s tendency to strike downward. The pigs are a modern addition by some unknown wit.

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