It's a Zoo Out There: 7 Animal-Related Market Terms to Know

Ever noticed how many animal-related references are out there in the finance world? Sure there are some common ones, like bulls, bears, doves, and hawks, but throw in a few ostriches, swans and maybe even a unicorn here and there and you've got a real zoo full of terminology!

With markets going through recent fluctuations as a result of uncertainties affecting global economies, we've put together a short cheat sheet of terms you may be hearing.

Bulls and Bears

Let's start with two terms you've likely heard often in your investing experience: bulls and bears. There are variations, of course – bull market, bear market, bullish, bearish. Here's the gist: bull is in reference to the way bulls attack, horns up. Bears, on the other hand, attack by drawing their paws downward. In essence, the direction of their attacks correlates to the way markets are moving.

Broadly, a bull market is a period in which optimism is high and prices are generally rising, usually over months or years. There can still be down market days or months, but the overall trend remains up. A bear market, meanwhile, applies when there's a prolonged period of falling prices and pessimism.

Doves and Hawks

References to our two winged friends tend to take off whenever we hear from central bankers on monetary policy. If you hear that a central bank statement took a dovish tone, that tends to mean central bankers are pessimistic about economic growth prospects and may be considering cutting interest rates to provide an economic boost. Conversely, hawkish central bankers are generally optimistic about economic growth prospects, but worried about inflation creeping higher. A hawkish tone could include a forecast for interest-rate hikes as a way to keep inflation in check.

Ostriches

What do you think of when you think of ostriches? Head in the sand? You're not alone. That's exactly why the ostrich effect is used to describe investors who tend to ignore tumbling stock markets or tough financial situations. They'd much rather stick their heads in the sand, so to speak, to avoid seeing any big declines in their portfolio.

Black Swans

Ah, those beautiful black swans. Wait, you haven't seen one? That's because they're relatively rare — just like the market events named after them. In the financial world, black swans represent unpredictable, massively transformative events that can shape the world — and in turn, the investment landscape. Beyond being unexpected and having a major impact, the third defining characteristic of a black swan event is that it's easily explained, or rationalized, after the fact as having been predictable. It's the “I knew it all along" phenomenon.

Unicorns

In the business world, unicorns are a real thing. A unicorn company is a privately held startup with a valuation of $1 billion or more. As the story goes, the term unicorn was first coined in this context in 2013 by someone who considered startups valued at more than $1 billion to be as rare as the mythical creatures.

What's your favourite (or not-so-favourite) animal-related term when it comes to markets? Leave a comment* to share your thoughts.

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