- Understanding the term “Bearish”: Bearish means that the investors are not expecting that stock market, or any stock will not rise shortly. The investors generally become pessimistic, thinks that things will go even worse and takes actions according to it. The investors having bearish view sell the stock to the purchaser at a specified price and believes that the stock price will fall further and to get profit they are the sellers of the call. The buyer of a put is also bearish on the market as they want the price to drop and they may sell the stock at a higher price to the seller of the put contract. The investors should go investments for blue chip companies in the bear market and should long on U.S. Treasury Bills in the case of rising yields.
- Why there is Bear Market: Bear markets happens when market sentiment of the investors is very low and has negative view which is often due to macro factors like widespread low employment rates and negative economic data for the long time. The most renowned bear market is the Great Depression of the 1930’s, which was accelerated due the Wall Street crash in 1929. The negative feelings had triggered by one event, which led to a long-term downward trend, but the bear market happens when the investors’ bearish sentiments continue for a longer term. The fluctuations in the stock, commodities or currency market are normal and therefore these investments are considered risky assets. It has been seen that only Forex Traders who can short sell on Forex Trading Platforms, can keep making profit in a serious bear market.
Moreover, the investors can become bearish when the neighborhood countries or the countries that has lot of affect in the world economy is tumbling. It will have an overall negative effect on all the countries, and all the stock markets of all over the world will fall further, if the economy of a particular country is dependent on any commodity, which forms the major part of its GDP. Then the drastic fall of the commodity or the bearish outlook on the commodity affects the overall market and gives bearish view on the market. Moreover, if there is major regulatory decision taken for any sector, which is negative for that sector to perform, then the investors become bearish on the sector and does not consider worth investing in the companies.
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