A Brief History of Markets - Bull and Bear

Either directly or indirectly, markets play a critical role in our lives. If you are in your 20s or 30s and earn decent money, you will likely invest, trade, and build your financial portfolio. Even if you don't invest or trade, changing market dynamics can affect your job or business. Hence, it is essential to know how the markets evolve.?

Every asset class (stocks, commodities, stocks) has independent markets, where they are listed, traded, and settled. And these markets followed their path depending upon the asset's value to society. Hence, they are many ups and downs in each market, and it is impossible to predict every time where the market will do next. But essentially, the markets form 2 phases - bull and bear- and these phases are typical across all markets.?

Bull markets are the phases when the overall market phase is upward, meaning the cumulative market cap of the asset class is going up. And conversely, in the bear market, the cumulative market cap of the asset class goes down. The terminology of bull and bear came into existence on how each animal (bull or bear) attacks in a fight. A bull will thrust its horns into the air, symbolizing the upward market. In contrast, a bear will swipe down, meaning the market is going down. Historically, all the assets have primarily followed the cycle of bull and bear runs. Depending upon the asset class size and the maturity of the asset class, the period of bull and bear runs can be in years or even decades.?

1) Indian Stock Market?

Source - https://www.markmobius.com/news-events/this-time-its-different-bear-markets-and-what-we-can-learn-from-history

After the 1991 economic liberalization policy enacted by the PV Narasimha Rao government, the Indian economy was more open, resulting in a gateway of opportunities for India. It resulted in direct benefit to the overall Indian economy, upgrading the lifestyle of millions of Indians. And this is reflected in the stock market's incremental growth. Over more than 30 years, the stock market was mainly in an uptrend, but there were cyclical bull and bear cycles. In total, the Indian stock market witnessed nine larger bear markets, averaging a decline of 44% ranging between a high of 71% and a low of 24%. The highest drop has been during the 2008 global meltdown crash because of the US housing crisis.?

2) US Stock Market?

Source - https://www.markmobius.com/news-events/this-time-its-different-bear-markets-and-what-we-can-learn-from-history

The US stock market is the world's largest, with a cumulative market cap of $42.1 trillion, as the US economy is the largest in the world. The US stock market also has legacy financial companies and is the hub of most top tech companies.?The US stock market's significant movements affect all countries, either in their subsequent movements in respective stock markets or the overall health of their respective economies. For example, one of the biggest US stock market downfalls in 2008 led to a subsequent downfall in all other stock markets of individual countries. Overall, the US stock market has experienced massive bull market growth followed by bear markets later. Since 1987 the market has experienced only three bear markets, excluding the current one. Those three bear markets averaged a 47% decline and ranged between a low of 34% and a high of 57%.?

3) Commodities - Gold?

Source - https://tradingeconomics.com/commodity/gold

Gold as a commodity has the largest market capitalization. Its use cases are widespread as a store of value and used by common people, as well as many nations' government treasuries use Gold as a reserve asset.?Historically, Gold has also witnessed a significant downtrend multiple times, but the downtrend has lasted for several years in each period. Since 1980, Gold has experienced four major bear markets, excluding the current one. And those three bear markets also range between a low of 24% and a high of 48%. The most notable ones were post-2010, where several measures like quantitative easing adopted by the USA and Europe resulted in a significant downtrend.?

4) Crypto?

Source - https://coinmarketcap.com/charts/

Over the last 13 years, crypto markets have evolved, and crypto has become an asset class for the digital age. Unfortunately, Crypto markets have also been through a significant downtrend that lasted from a few months to a few years. Crypto markets are notorious for higher volatility than any other asset class. Since 2013, there have been two extreme bear markets, excluding the current one. The first bear market had a cumulative low of 78%, and the second bear market had a low of 86%. Recent price action in crypto markets has been widely advocated as a bear market with a low of 72% from ATH till now.