What are bull and bear markets?
Key Points
Long-term markets showing an upward trend are bull markets, while markets showing a long-term downward trend are bear markets.
Bull and bear markets each have three stages, with the end of a bear market often being the beginning of a bull market, and the end of a bull market often being the beginning of a bear market.
In a bull market, pay attention to selecting the right symbols, avoid selling easily, watch out for sell signals at the end; in a bear market, avoid blind operations, consider setting stop-loss lines, and watch out for buy signals at the end.
The main driving forces of the three bull markets in the Hang Seng Index: improvement in economic fundamentals, valuation adjustments, improvement in capital conditions, etc.
Concept Explanation
Regarding the origins of bull and bear markets, there are too many explanations in the market, and it is difficult to ascertain the true reasons. However, bulls are often considered symbols of strength, while bears tend to give people a heavy feeling.
Therefore, it is not difficult to understand that a market where asset prices generally rise continuously over a long period of time is called a bull market. Conversely, a market where asset prices generally fall continuously over a long period of time is called a bear market.
But a bull market does not mean there will be no declines at all; there will also be some pullbacks. Similarly, a bear market does not mean there will be no rises at all; there will also be some rebounds.
As for the question of 'how much percentage increase/decrease constitutes a bull/bear market,' there is no clear standard in the market, with many people considering this percentage to be 20%.
Understanding bull and bear markets, being clear about the risks and returns they bring, can lead to rational investments and thus achieve satisfactory returns.
Different stages of bull and bear markets
Bull and bear markets are typically divided into three stages.
In the early stages of a bull market, a few people believe the market will improve, and these investors start buying; in the mid-term of a bull market, the market continues to rise, and most investors realize the bull market has arrived; at the end of a bull market, everyone believes the bull market has arrived, and market sentiment is extremely high.
In the early stages of a bear market, a few people realize the market will not keep rising, and these investors start selling; in the mid-term of a bear market, the market continues to fall, and most investors realize the situation is deteriorating; at the end of a bear market, everyone feels the situation will only get worse, and market sentiment is extremely negative.
That's right, when everyone believes a bull market has arrived, it often reaches its peak; when everyone thinks a bear market has arrived, the bear market is often close to ending. Therefore, 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, but sometimes there may also be a directionless oscillating market between the two.
How to navigate bull and bear markets.
First, you can buy at the end of a bear market and sell at the end of a bull market. While it may be difficult to predict the highest point of a bull market and the lowest point of a bear market, roughly determining the end of a bear market and a bull market can still yield significant profits.
Secondly, in a bull market, it is important to carefully select symbols in order to achieve higher returns. Once chosen, these symbols should not be sold hastily to avoid missing out on better profit opportunities. However, it is important to watch out for signals at the end of a bull market, such as high volume but stagnant market gains, and an influx of new investors.
Thirdly, in a bear market, if you lack sufficient expertise or energy, avoid making blind decisions. If you already have positions at that time, it is advisable to set a stop-loss line and sell once triggered. When approaching the end of a bear market or during a prolonged stage of rebound, pay attention to the timing of reentry.
The above methods are for reference only. Only through continuous learning and practice can you find an investment approach that suits you.
Three major bull markets in the Hong Kong stock market.
How do you determine whether the current market is in a bull or bear phase? There is no simple, unified standard for this. It requires comprehensive consideration of economic fundamentals, capital flow, technical aspects, emotional factors, etc. Different individuals may have different judgments. However, examining the three recent major bull markets in the Hong Kong stock market can enhance one's perception and judgment of bull markets.
However, examining the three recent major bull markets in the Hong Kong stock market can enhance one's perception and judgment of bull markets.
After the Asian financial crisis, the economy of the Hong Kong region recovered. Hong Kong's GDP growth rate turned positive in 1999 and reached 5% in 2000. The global GDP recovery also boosted Hong Kong's exports and consumption. With the boom in US technology stocks, Hong Kong stocks' valuation also returned to normal. The economic recovery and valuation normalization contributed to a major bull market in Hong Kong stocks from August 1998 to March 2000, during which the Hang Seng Index rose by approximately 175%.
From April 2003 to October 2007, the Hong Kong stock market experienced another significant bull market, with the Hang Seng Index increasing by about 276%. The main reasons for this bull market were the economic prosperity in the Hong Kong region, with per capita GDP growth of 7.1% and 6.1% in 2005 and 2006, respectively.
At the end of 2016, the Shenzhen-Hong Kong Stock Connect was established, leading to an increase in funds flowing into Hong Kong. In 2017, the prosperity of China's real estate industry significantly improved, driving up related sectors of Hong Kong stocks. Subsequent strengthening economic recovery expectations, steady improvement in the US economy, and the gradual return to normal valuations also played a role. The enhanced expectations of economic recovery, valuation restoration, and increased funds from the north collectively contributed to a significant bull market in Hong Kong stocks from March 2016 to January 2018, during which the Hang Seng Index surged by around 70%.
