Several market trends occur in financial establishments that categorize how investors are acting; though not as common as the bull or bear markets, the deer market is a somewhat average trend. In this market, stocks and bonds are flat, meaning their prices remain relatively unchanged for a prolonged amount of time. During this time, investors tend to be shy and skittish, much like a deer. This market commonly occurs while investors wait for earnings reports, and trade volume tends to be low. Bull and bear markets oppose the deer market, because they are categorized by mass trade volume.
The deer market is known as a flat market, because stocks and bonds remain at roughly the same price. While the price of stocks and bonds may fluctuate, the changes are typically insignificant overall. This does not mean the market is doing poorly, because the value of stocks and bonds may be rather high; it does mean the market is stagnating from a lack of change. Skilled investors can make money in this market by trading stocks associated with the few companies that are fluctuating.
Investors tend to act like nervous deer during a deer market; they are typically very cautious and do not initiate much buying, selling or trading of stocks and bonds. Instead, most investors hold their stance and wait for the market to move either up or down. This stance tends to fortify the market’s stagnation. The market can begin moving when investors start investing again, or if businesses thrive or fail; both affect the price of stocks and bonds.
While a deer market can occur at any time, it most often occurs when investors are waiting for information from businesses, such as earnings reports. These reports tend to shape the market and increase or decrease investors’ confidence in the market, causing a bull or bear market to emerge. A deer market also may emerge if businesses collectively stop expanding, because this tends to flatten out the prices of stocks and bonds.
After the deer market is finished, a bull or bear market will emerge. If investors perceive that stocks and bonds will be going up in value, then a bull market occurs. During this time, investors start buying a large number of stocks and bonds before their price becomes too high. The bear market is the opposite. Investors believe stocks and bonds are going to plummet in value, so they trend toward selling before the stocks and bonds become worthless so they can cut any losses.