Each week, one of our wealth through education. If you'd like us to answer one of your questions, email us at [email protected] and include " Q&A" in the subject line. (Note: We not respond to requests for picks.)experts answers a reader's question in our InvestingAnswers' Q&A column. It's all part of our mission to help consumers build and protect their
-- Byron, Vienna, Va.
A: That's an interesting question, Byron. Plenty of experts in the , as well as talking heads on TV, use the words "bull" and "bear" to describe markets and investor sentiment, but I doubt many of them ever really considered where those terms came from.
Before we jump into how these words came about, let's first catch everyone up to speed on what they in the investing world.
A bull market is a stretch of time when prices -- such as prices, prices, house prices, etc. -- keep rising over the course of several months or years (with the usually gaining 15% or more). Bull markets usually are driven by a strong with low inflation and optimistic investors. The mostly prosperous of the late 1980s and 1990s drove one of the strongest bull markets of all time; from this period's start on December 4, 1987, to its end on March 24, 2000, the S&P 500 Index gained more than 580% -- averaging gains of 48% per year for 12 straight years! And that's no bull.
A bear market is the opposite. A sluggish with poor consumer confidence and high inflation leads to pessimism among investors who sell and cause market prices to fall over a period of time; this is the dreaded bear market. The worst (and longest) bear market in history sparked the Great when it began in September 1929. By the time this bear market ended in July 1932, the Dow Jones Industrial Average had dropped a painful 89.2%.
The terms bull and bear can describe investors, too. Investors who are optimistic about the market's future are referred to as bullish investors, or "bulls," and investors who are pessimistic about the market's future are called bearish investors, or "bears."
So how did the investing terms "bull" and "bear" originate?
I have always heard the explanation go something like this: Bulls attack by bucking their horns UP toward the sky, while bears attack by swiping their claws DOWN toward the ground, suggesting that the words were taken from the animal attack movements to describe the price movement of the market.
However, after researching the origins of the words further, I found a couple of more interesting explanations on how the terms may have originated.
First, the terms of investor bulls and bears are much older than you may think. These were reportedly used to describe investors at least as far back as the late 1700s in the book "Every Man His Own ," written by Thomas Mortimer.
One theory of how "bull" originated stems from the word's etymology. The Online Etymology Dictionary says the Germanic root of the word "bull" meant "to blow, inflate, [or] swell" -- certainly terms that describe a rising market.
So where did the term "bear" come from? In the Elizabethan era in the late 1500s, there were two popular (and brutal) coliseum-like sporting events called "bull baiting" and "bear baiting." Because bear baiting was an alternative to bull baiting, bears may have been considered the opposite of bulls. Perhaps investors who knew their Elizabethan history decided that the opposite of an inflating "bull" market was a deflating or falling "bear" market.
Another interesting theory -- according to WorldWideWords.org -- about the backstory of the term "bear" traces back to the early 1700s. In the early London exchange (called "the Exchange Alley" then), speculative investors who practiced short-selling (selling they didn't own during a falling market to ultimately make a ) were called "bearskin ." That nickname, which poked fun at the short-selling speculators, came from a cautionary French proverb that translated to: "Don't sell the bear's skin before you've killed him." It's possible that over time, selling in a falling market became more associated with bearskin , or bears, in market investing -- and that's why a falling market is a "bears' market."
Who knew that such popular words used every day in investing would come from such unlikely places!
Read more of ourAnswer Q&A responses:
These Super-Simple Take The Work Out Of
- Create a retirement savings goal
- Design an investment plan to reach it.
- Get a professional money manager to continually monitor and rebalance your portfolio
Sound complicated? Don't stress. Vanguard's new robo advisor service can help you put all of this (and more!) on autopilot, all for an annual gross advisory fee of just 0.20%.