The terms ‘bulls’ and ‘bears’ are integral to the financial markets, as they describe the general actions and attitudes or sentiments of an individual or the market. Bulls refer to buyers and markets that rise in price, whereas bears refer to sellers and markets that decline in price.
While many traders learn the jargon at the very beginning of their trading careers, not many people are familiar with the history behind these terms.
The very first connotation is due to the way each animal attacks its prey. A bull will thrust its horns up into the air while a bear will swipe down. However, you may be surprised to know there’s much more to it!
Historically, bears came first. The middlemen who would sell bearskins were referred to as bears. The reasoning behind the name is not as straightforward as you might think. It referred to the selling of the skins that were yet to be received. As such, the middlemen would speculate on the future price of these skins from the trappers, hoping that they would drop. Consequently, bears became shorthand for bearskin jobbers and also became a term describing a downturn in the market.
This usage was confirmed later on in history by a famous English scandal known as the South Sea Bubble. The name came for the South Sea Company, which was founded in the early eighteenth-century to trade with Spanish colonies in the New World. Once the king became the governor of the company, its stock became highly desirable. In a nutshell, stockholders were enjoying high returns, and the company assumed most of the British national debt. That way they convinced investors to give up state annuities for company stock, which was sold at a very high premium. The end of the story was rather unfortunate for most investors, as the stock price suddenly collapsed and most of the speculators had been selling the stock without actually owning it. This event led to the widespread use of the term 'bear'.
At around the same time, ‘bull’ made its first significant appearance on the market, as a counter to the bear. This term referring to a speculative purchase in the expectation that the price would rise has its origins in ancient matches where bears and bulls were fierce opponents. In the Elizabethan era in London as well as in ancient Rome, bears and bulls were put into an arena to fight one another.
This animal imagery caught on and has been a central part of the financial markets until the present day.
