Not a bull market or bear market: Are we in a buffalo market?

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Subscribe to enjoy similar stories. Bull market and bear market are two terms that every stock market investor is familiar with. While bull markets create wealth, bear markets destroy wealth.

Bull markets are driven by greed and bear markets are by fear. But there’s a new term doing the rounds: Buffalo market. What is this new kind of ‘market’ all about? Let’s find out… Buffalo market, a term coined on Wall Street by the folks at Bank of America, is one which ‘roams around’.

It neither goes up nor down decisively. A buffalo market doesn’t mean a flat market. Stocks as well as the benchmark indices will continue to move up and down but not by a significant margin.

In other words, stocks prices will mostly just about roam, i.e., wander around a bit, without making a clear move in either direction. In fact, after a big move, either up or down, a buffalo market will get ‘tired’ and then the move will likely fizzle out. Yes, it can.

The key is in the fundamentals. In the Indian stock market, the bull market will eventually resume as long as companies continue delivering strong earnings without putting too much pressure on their balance sheets. A buffalo market, in this case will be temporary.

Short term trends may move the market up or down for a while, but eventually, the bull market will establish its dominance. Of course, the reverse is also true. If the underlying fundamentals of the market were to deteriorate, then the buffalo market will eventually turn into a bear market.

Only a trigger event would be needed to tip the market over. Just because the bulls are not in control of the stock market doesn’t mean you should change your investing strategy. Long-term investing is the way to go.