If you’ve ever looked into the stock market, you’ve undoubtedly stumbled across the term bull market. As of 2022, we’re no longer in one, but what is a bull market, and why does it affect me?
A bull market is a condition of the financial markets when the prices of securities or assets rise for a prolonged period. You’ll often hear the term bull run also associated, which means the markets are on the rise.
The term can be applied to many types of securities such as stocks, bonds, real estate, commodities and currencies.
Generally, bull markets come after bear markets, when the market has gone down for a prolonged period. If you want to learn about ‘What is a bear market’ then come back up and click here.
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What is a bull market and what causes one?
Bull markets generally occur when the economy is performing above average. Usually, there’s strong growth in GDP and unemployment is low or decreasing.
During or just before a bull market, most companies are posting profits, and growth is being forecasted.When all of these conditions come together, investors are full of confidence and begin putting their money into the markets on a regular basis.
Technical investors consider bull markets to be an upswing in stocks which is growth compared to a bear market in a downswing.
Bull markets can be in any asset class including stocks, bonds, crypto, commodities or currencies.
Who are bulls and what does bullish mean?
When understanding ‘what is a bull market’ you will hear the term bullish used a lot. The bulls are investors with confidence, and they’re bullish (confident) about what is to come. They’re more likely to make riskier investments because, generally, there is a risk-off attitude across the entire market.
Bull market example: I’m incredibly bullish on Amazon stock after they released their new cloud computing sector.
The reason they call it a bull is an animal analogy for a bull who thrusts its horns up. It’s essentially the attacking movement made by a male bull.
How often do bull markets occur, and how long do they last?
Bull markets tend to occur more often than bear markets. On average, a bull market lasts 2.7 years or 991 days, and the stock market has been in a bull market for 78% of its existence.
Bull markets are clearly much for frequent and longer than bear markets. This data goes right back to the formation of the stock market, so you can be pretty sure if history repeats, you will be experiencing a bull market for most of your investing life.
When was the last bull market?
It is the subject of much debate; however, many analysts have said that the latest bull market began in March 2009 and ended with the recent global pandemic. That means the most recent bull market lasted over ten years!
The recent bull market of 2009 is also the longest bull market on record. It was caused by an incredible rise of technology stocks, most notably the infamous FAANG stocks.Â
These major tech stocks were (and still are) crushing earnings reports experiencing tremendous growth consistent over such a long period.
The second-largest bull market in history was in the 1990s, 113 months long or 9.4 years. It is, however, the bull market with the highest gains experience. The S&P500 rose 417% compared to the 2009 bull market, which returned 330%.
Not bad if you got in at the beginning of a bull run!Â
Should you buy during a bull market?
If you did manage to invest at the beginning of a bull run then you can experience significant gains. However, it is near impossible to know when the markets have finally reached a bottom and begun their climb upwards.
If you adopt a dollar-cost average strategy, you benefit from both bull markets and bear markets with an overall average price that’s usually lower than someone who consistently trades.
Overall on average, stock markets go up 112% during bull markets, so even if you don’t manage to time the beginning, there are some significant gains to be had.
When you’re stuck in a bear market for a while it can be difficult to trust the basics of stock picking. You begin to take in the fear that the media and investors are pushing which can result in emotional investing that often leads to selling too soon or not taking a good opportunity.
It could be said that investing in bull markets are safer but you still need to have learnt how to pick stocks or have put your trust in someone that know what they’re doing.
What learning ‘what is a bull market’ its important to know where you are in the cycle so you don’t get caught at the top.
What is a bull market rally?
A rally is when stocks are on the rise, usually for a minimum of a few days or more. Therefore a bull market rally happens within an ongoing bull market.
It’s a great time to buy if you manage to catch the beginning of a bull market rally as stocks are generally quite aggressive in their price action.
Are we in a bull market in 2022?
Right now, we’re officially in a bear market with the S&P500 and Nasdaq dropping over 20%. Analysts believe this is due to several economic factors such as inflation, fear of recession, vast money printing and the ongoing war in Ukraine.
Is it good to buy a bullish stock?
If an analyst is bullish on a stock that’s generally a sign that they believe the price will rise over the next 12 months. A bullish prediction could be given in any market circumstance and be made on any type of asset class.
A bullish verdict by an analyst even if they are correct is in an opinion so it’s important to always look into the stock yourself before making a buy decision.
We hope you’ve picked up on ‘what is a bull market’ but if you want to learn more then visit our investing for beginners academy page.
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Disclaimer: Content on this page is for informational purposes and does not constitute financial advice. Always do your own research before making a financially related decision.
