What Is a Bull Market, and How Can Investors Benefit From One?

When you view historical charts that measure the rise and fall of the stock market, you’ll see clear rising slopes over time that indicate when there was likely a bull market. You’ll also see the percentage growth of stocks and bonds during that time. While bull markets don’t always necessarily mean that there won’t be slight dips in the market, it does indicate steady financial growth as the value of stocks and bonds tend to trend upward overall. Titan Global Capital Management USA LLC („Titan“) is an investment adviser registered with the Securities and Exchange Commission (“SEC”). By using this website, you accept and agree to Titan’s Terms of Use and Privacy Policy. Titan’s investment advisory services are available only to residents of the United States in jurisdictions where Titan is registered.

The Internet era in the 90s started the second-longest bull market to date. An era of prosperity that was driven by investors seeing potential in investing in tech companies. The S&P surged by over 400%, driven by economic growth and stable inflation.

How Long Does a Bull Market Last?

Since bull markets begin with price increases from a trough, they immediately follow bear markets, when pessimism is highest. During this phase, also known as accumulation, early adopters exploit low stock prices to acquire cheap assets. According to the US Securities and Exchange Commission (SEC), a bull market is defined as a time when stock prices are rising and market sentiment is optimistic. Generally, a bull market occurs when there is a rise of 20% or more in a broad market index over at least a two-month period. When stocks are rising during a bull market, it usually indicates a time of economic expansion, that the economy is strong and investors are confident.

A bull market occurs when asset prices rise significantly over a sustained period. While analysts often use the term “bull market” to discuss stocks and the stock market, the term can be used for any asset – bonds, real estate, commodities or even cryptocurrency – that is rising over time. Some analysts define a bull market as one which has risen 20 percent from its most recent low. Whether the market is charging forward or retreating for a little nap, investors can learn to navigate the ups and downs. Investment of any kind comes with risk, especially as the economy fluctuates.

Why Do Bull Markets Sometimes Falter and Become Bear Markets?

World events, the business cycle, and the opinions of investing icons are all examples of factors that influence investors to cause price fluctuations. While the precise origin of the term bull market is hard to identify, the meaning may lie in the animal’s method of attack. As bulls attack with their horns upward, a “bull” market refers to uptrends.

In this article, we explore what constitutes a bull and bear market, some distinguishing characteristics, and how a trader might position themselves within these different environments. In February and March 2020, the S&P 500 took a historic plunge https://forexarticles.net/2021-junior-software-engineer-salary-in-boston/ as the result of economic turmoil and uncertainty from the COVID-19 pandemic. However, with the passing of government stimulus bills as well as optimism among investors, the S&P 500 rebounded, seeing historic gains and closing at record levels.

What is a Bull Market? Definition & Indicators

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• Investors tend to lose value in their portfolio and this also translates to a lack of confidence in the market.
• Companies that are performing well in a bull market may also choose to reward their shareholders by increasing dividends, which can be attractive for income-focused investors.
• You then have the difficult decision of figuring out when to reenter the stock market.
• Human capital is an intangible asset made up of knowledge, experience, habits, creativity, and personality that helps a person or a workforce produce economic value.

This stimulation of economic activity is known as supply-side economics. The run ended suddenly on 19 October 1987, known as Black Monday, when the Dow Jones Industrial Average fell 22.6% in a day. The S&P 500 gained 266% between June 1949 and August 1956, at a CAGR of 20%, before Eisenhower’s heart attack and the Soviet Union’s invasion of Hungary curtailed post-war optimism.

What is a secular bull market?

„Finance Made Simple“ blog posts are intended for educational purposes and not for specific advice. Consult your financial advisor for advice relating to topics discussed. Wood Smith Advisors, a woman-owned Registered Investment Advisor (RIA), is a fee-only financial services firm that partners with its clients to simplify their financial lives. Do the following words have you holding your head in fear and confusion – Recession, Depression, Bubbles, Bull and Bear Markets? Do you wonder when morning shows use them whether you should be celebrating or stuffing your money into a mattress? Let’s discuss the history and definition behind all these terms and what they mean for you.

• Between March 2009 and the same month 11 years later, the S&P 500 gained over 400.5% at a CAGR (compound annual growth rate) of 16%.
• Both periods earn the bull/bear mascot combo because they grew or fell by over 20%.
• The bottom line is that bull markets tend to be several years in length and are always preceded by and ended by bear markets.
• Like a savvy matador, individual investors should keep an eye on the bull’s moves, and adjust accordingly — but always stay focused on their overall strategy and goals.
• The value of gold decreased as the gold bear market continued for the most part from 1987 to 2001, after which gold experienced some spectacular bull runs.

All investments involve the risk of loss and the past performance of a security or a financial product does not guarantee future results or returns. The years preceding this bull run witnessed the subprime mortgage crisis that resulted in economic loss and turmoil throughout the world. The pain caused by the economic crisis resulted in extremely low-interest rates and other favorable economic conditions. The access to cheap capital allowed businesses to invest and corporate earnings improved. Over the 131 months included in this bull run, the S&P 500 grew more than 400%.

At the start of 2020, when COVID-19 sent markets downward and shut the world’s economy, this bull run was finally over. This is an example of how outside forces can wreak havoc on economies, even if previous economic conditions appear positive. Overall, no one knows when a transition 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.

A bull market is the condition of a financial market in which prices are rising or are expected to rise. The term „bull market“ is most often used to refer to the stock market but can be applied to anything that is traded, such as bonds, real estate, currencies, and commodities. Stash assumes no obligation to provide notifications of changes in any factors that could affect the information provided. This information should not be relied upon by the reader as research or investment advice regarding any issuer or security in particular. There is no guarantee that any strategies discussed will be effective.

Broadly speaking, a bull market is a sustained period — usually months or years — when prices rise. The term is most commonly used in reference to the stock market, but other asset classes can have bull markets as well, such as real estate, commodities, or foreign currencies. Bull markets generally take place when the economy is strengthening or when it is already strong. They tend to happen in line with strong gross domestic product (GDP) and a drop in unemployment and will often coincide with a rise in corporate profits. 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.

Unemployment is low, money is being invested, confidence is high, etc. But there have been bull market „bubbles“ in which value was perceived rather than real. If you’re approaching the end of your investment timeline (a.k.a. you’re a few years away from your target retirement date), you have less time to recover from bear market dips. While we know the market historically has recovered from each bear market, you may not have the average two years for your investments to return to their previous values. While you should try not to sell during a downturn, a bear market may also provide a reminder to revisit your investing strategy once the market recovers. Even though you know a market recovery will happen, you may realize that your willingness to take on risk is less than you thought.

Over the next year, many investors are likely to repeat those four words as they defend higher stock prices. But they should treat them with the same consideration they give “the check’s in the mail.”  No matter what brokers

or money managers say, bull markets do not last forever. It’s helpful for investors to know what type of bear market they’re in before trading securities. A bear market may be an indicator of normal fluctuations in the stock market, or it may signal that the economy is headed for a more serious downturn. The three types of bear markets include event-driven, cyclical, and asset-bubble unwinds. Since WWII, bear markets have taken 13 months on average to go from peak to trough and 27 months to get back to breakeven.