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The deer market is a flat market with little trading volume and stagnant stock and bond prices. Investors tend to be cautious and wait for market movement. It often occurs when investors await earnings reports and can lead to a bull or bear market.
Several market trends occur in financial establishments that categorize how investors act; Although not as common as the bull or bear market, the deer market is an average trend. In this market, stocks and bonds are flat, meaning their prices remain relatively unchanged for a long period of time. During this time, investors tend to be timid and skittish, like a deer. This market commonly occurs while investors await earnings reports, and trading volume tends to be low. Bull and bear markets are opposed to the deer market, because they are categorized by massive trade volume.
The deer market is known as a flat market, because stocks and bonds stay at roughly the same price. While the price of stocks and bonds can fluctuate, the changes are generally insignificant overall. This does not mean that the market is doing badly, because the value of stocks and bonds can be quite high; it means that the market is stagnating for lack of change. Savvy investors can make money in this market by trading shares associated with the few companies that fluctuate.
Investors tend to act like nervous deer during a deer market; They are generally very cautious and do not initiate many purchases, sales, or transactions of stocks and bonds. Instead, most investors remain in their position and wait for the market to move up or down. This stance tends to strengthen the stagnation of the market. The market can start to move when investors start investing again, or if companies 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 companies, such as earnings reports. These reports tend to shape the market and increase or decrease investor confidence in the market, causing a bull or bear market to emerge. A deer market can also arise if companies stop expanding collectively, because this tends to level out stock and bond prices.
After the deer market is over, either a bull or a bear market will emerge. If investors perceive that stocks and bonds will rise in value, then a bull market occurs. During this time, investors start to buy a large number of stocks and bonds before their price gets too high. The bear market is the opposite. Investors believe that stocks and bonds are going to plummet, so they tend to sell before stocks and bonds lose value so they can cut their losses.
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