Animals in the market
Just imagine Kenya Barris realizing that he is not the first person to add “ish” to a term (grownish and blackish). The market had done it before him. Today we would be learning what market sentiments are.
Market sentiment is the overall consensus about a stock or the whole stock market (Investopedia). It is the feeling or tone of the market that is revealed in the activity and price movement of the securities that are traded in a specific market. So basically, it is emotion of the market expressed in prices of securities in the market. As usual, there are terminologies attached to the different “types” of market sentiments and we would be breaking them down in this article
First off is bullish. When the market is bullish, the prices of stocks in the market are rising. It is characterized by favorable economic prospects which include better economic policies targeted at the financial market such as expansionary business conditions. So, these policies would have a positive effect on the market and prices rise. An example of the market being bullish can be seen at the close of 2022, when the NGX All-Share Index appreciated by 19.98 percent
Second is bearish. When the market is bearish, the prices of stocks are falling. This can be attributed to unfavorable economic policies or global occurences such as a pandemic and low investor confidence in the market. The market can also be termed bearish when there are high levels of uncertainty, when investors are pessimistic about the market and have limited access to information that would aid decision making. One significant example of financial markets being bearish is during the great depression.
To Learn
To be an effective investor and earn profitable returns on investments, it is important to know the sentiments of the market. An investor who is unable to tell when the market is bearish, would end up losing a lot of funds when he could have diversified his portfolio in historically dividend paying companies. Also, an investor who is not able to see signs of a market being bullish would not maximize the early periods of increased prices and miss the opportunity to watch prices of acquire shares rise.