What is a Bull Market? Definition & Indicators

An important point to know as an investor is to understand that the U.S. economy operates in cycles of Bear and Bull Markets. 1970s Stagflation and Oil Crisis – U.S. dollar inflation skyrockets and OPEC cuts down oil supply and trade, leading to about two years of the financial crisis in the U.S. Post-2008 Crisis Bull Run – Stock market indexes hit all-time highs, investing in passive indexes and funds become popular and even survive the pandemic plunge in mid-2020. Great Expansion – The 90s stability in the economy saw large job growth and was followed by the “Dotcom” investing bubble in the early 2000s. 1970s Growth – U.S. was able to bounce back after a series of declines in the early 1970s including the global oil crisis. The digital currency known as Bitcoin, which was valued at around 8 cents when it was launched in 2010, reached an all-time high of over $68,000 in November 2021.

• But those who take a long-term view, diversify, and understand the historical cycles of the market are often best positioned to achieve their financial goals.
• Usually, all three would show signs of rising stock market indexes simultaneously, driven by economic health and investor sentiment.
• It went from 6,594.44 in 2009, to a high of 29,551.42 on February 12, 2020, returning 348%.
• South Sea stock became highly desirable when the king became governor of the company, and soon stockholders were enjoying returns of up to 100 percent.
• Industries That Thrive During Recessions Some industries do well when the economy goes south.

Interest rates went lower and lower, causing excitement among real estate investors and bull conditions in the real estate market. At the same time, the financial institutions that supported the mortgage industry invented new loan vehicles and lowered lending standards. There is no specific and universal metric used to identify a bull market. Nonetheless, perhaps the most common definition of a bull market is a situation in which stock prices rise by 20% or more from recent lows. Bull markets are characterized by optimism, investor confidence, and expectations that strong results should continue for an extended period of time.

What Does It Mean When an Investor Is Bullish on a Particular Stock?

During this time, the S&P 500 increased by a significant margin after a previous decline; as the 2008 financial crisis took effect, major declines occurred again after the bull market run. The commonly accepted definition of a bull market is when stock prices rise by 20% after two declines of 20% each. In fact, from 1995 to 2000 alone, NASDAQ company stock prices grew more than 400%. However, while the bull run ended in 2000, the full crash did not occur until 2002. When the bubble burst, it wiped out many tech companies that previously had strong valuations. While acceptable P/E ratios depend on industries and other factors, this is always worth considering if you are investing in bull markets.

A bull market starts when investors have the feeling that prices are beginning to rise and trust that they will continue to do so. If investor confidence is high, they begin to buy and sell more stocks, which drives up the stock prices. When the market prices are increasing and are expected to continue to increase, it is referred to as a bull market.

What Is a Bull Market? Definition, Indicators, and Examples

Understanding the length and causes of bull and bear markets can influence how you react to them. Historically, according to research compiled by Invesco, a bull market lasts an average of 1,742 days, versus 349 days on average for a bear market. A bull market gains an average of 180.04% to a bear market’s loss of 36.34%.

After taking a beating during the Great Recession , the S&P 500 gained over 400% after a low of 666 points on March 6, 2009. On February 12, 2020, the Dow Jones Industrial Average reached a record high of 29,551 points. The gains for the S&P alone amounted to over $18 trillion on paper, and during the period unemployment was at a 40-year low, at under 4%.

Some may be tempted to throw cash into stocks that are booming during a bear market. But those who take a long-term view, diversify, and understand the historical cycles of the market are often best positioned to achieve their financial goals. The optimism of the post-WWII years was fueled by economic strength built in part on a strong export market, which bolstered companies at home.

Bull Markets are a time period in which people are investing more, unemployment is low, taxes could be low, inflation is steady and confidence is high. When an investor is “bullish” on a stock or a sector, that means he/she believes it will be going up. If someone has a bullish view on the economy, that means they believe there will be positive economic developments, such as employment growth or GDP. Using market data to identify trends , analysts have quantified an official bull market as a period when the S&P 500 increases at least 20% after two distinct declines of 20%.

The difference between a bull and bear market is in the current market condition. While a bull market is a sign of a rising market, a bear market indicates a falling market and is sometimes a sign of higher volatility – which can increase your risk#. Overall, no one knows when a transition why you should trade with fx open from a bull market to a bear market is likely to happen. These shifts in the market can happen slowly over time, and the exact dates can be determined only in retrospect. Hence, it is hard to predict whether prices will continue to increase or when the market will crash.

Perhaps the most aggressive way of attempting to capitalize on a bull market is the process known as full swing trading. Stock pickers had a tough time during the decade after the 2008 financial crisis, as a monster run in big technology stocks powered a bull market that drove major indexes to dozens of new highs. If you read investment analysis, you may come across analysts that say they are “bullish” about a stock. This means that the analyst believes that the stock will perform well.

Discover what bullish investors look for in stocks and other assets. Tech stocks are having a bad few weeks on disappointing earnings reports, but investors are betting that traditional stocks like banks will lead the next bull market, The Wall Street Journal reports. When you hear investors refer to “top-line growth,” they are speaking about an increase in a business’s top-line revenue, which is the overall revenue or turnover for the company. Bull markets will often see businesses increase their overall revenue.

Characteristics of Bull Markets

Stock prices are informed by future expectations of profits and the ability of firms to generate cash flows. A strong production economy, high employment, and rising GDP all suggest profits will continue to grow, and this is reflected in rising stock prices. Low interest rates and low corporate tax rates also are positive for corporate profitability.

Keep in mind, some bull markets can lead to frenzies, which result in bubbles that exceed earnings. A bull market is a period of significant growth, and major stock indexes are typically used to measure bull markets, but the term can also refer to the growth of individual securities. Bull markets tend to last longer than bear markets and deliver returns that more than offset the losses in bear markets. So most investors should stick to a long-term investing strategy, and avoid trying to outguess the market as a short-term trader – or risk severely underperforming.

What is a bull market?

For most investors, it’s best to develop a long-term strategy and stick to it regardless of market conditions. For example, you might invest the same amount at regular intervals, using the popular investing strategy called dollar-cost averaging. Because you always invest regardless of market conditions, sometimes you’ll be buying at relatively cheaper prices.

Globalization resulted in an increase in trade across the world and has made international investment more prevalent. “Reaganomics” Era – Investor confidence was boosted by low inflation following the 70s inflation crisis and low tax policy. The most widely used numerical target to determine a Bull Market is when general stock values gain 20% after two declines of 20% each. In 1989, sculptor Arturo di Modica installed a bronze bull on Broadway at Bowling Green Park in Manhattan’s financial district. He created it as a symbol of defiance after the turbulent Stock Market Crash of 1987.

Post-war boom: 86 months

The stock market is naturally a very unpredictable asset to invest in. A Bear Market amplifies this risk and unpredictability which makes it a dangerous time to invest. It is a period of decline umarkets forex broker review in the S&P 500 of at least 20% for two months or longer. A bear market erases gains from a bull market and is characterized by negative investor sentiment, pessimism, and even fear.

The massive statue stands poised to charge, its horns thrust skyward, its stance widening, and its hooves leaving the ground—a harbinger for better days ahead. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Volatility profiles based on trailing-three-year calculations of the standard deviation of service investment returns.

Tech Bubble – Also known as the “Dotcom Crash” – emerging technology companies were overvalued. Tons of investors were buying stocks of anything technology-related but ended up being life insurance, 15th ed a big bust. The Great Depression – Stock Market Crash of 1929 witnessed the largest drop in overall stock market value and the highest unemployment rate recorded in U.S. history.

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The U.S. Stock Market moves through cycles of Bull and Bear markets. Bull Market investors are more confident in investing because it is safer to make money. Bear Market investing is a lot riskier and investors have to take riskier options if they want to see an increase in their portfolio. During a Bear Market, there is usually a general sell-off of stocks, which can be risky just to sell. Investors may have made some money during a recent increase in the stock market, and then decide to sell because of a 20% decline during a Bear Market, and lose everything they gained. Not only this, some investors attempt to take advantage of plunging prices or attempt to recoup their losses by making riskier decisions.

If analysts believe that a specific stock price will decrease in the future, they say they are “bearish” about a stock. Companies that sell products directly to consumers have proven themselves over decades. Bull markets in recent years have tended to be powered by such companies, but more importantly, they may be a decent safe harbor during downturns as well. Consider investing in these equities, or in a large-cap mutual fund with such stalwarts. Bull markets are usually accompanied by high investor confidence and a strong overall economy.

The History of ‘Bull’ and ‘Bear’ Markets

Investor confidence will also tend to climb throughout a bull market period. The overall demand for stocks will be positive, along with the overall tone of the market. In addition, there will be a general increase in the amount of IPO activity during bull markets.

This bull market was characterized by strong earnings growth, low interest rates, and investor optimism. Despite its length, the bull market was relatively volatile, with several corrections and pullbacks along the way. The technology sector significantly outperformed the broader market during this bull market.

An overall bull market may encounter dips along the road, referred to as market corrections, but in general, the underlying price trend will continue to rise. A number of indicators might point to the fact that we are in a bull market, and thus the following market characteristics are more likely to be seen during a bull market. Since the financial crisis of 2008, the stock market has been growing.