What Is a Bull Market? Definition & Characteristics

bull market definition us history

Navigating bear markets and bull markets is relatively simple as there are a couple of characteristics to look for that point to either trend. Although the stock market will still experience dips during a bull market, those dips don’t affect the continuing upward trend where confidence and the demand to buy stocks are high. Investing in the stock market is full of ups and downs, as stocks rise and fall regularly. However, when longer trends occur, you’ll hear the terms bull vs. bear, which signify longer uptrends or downtrends in the market.

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Investments in T-bills involve a variety of risks, including credit risk, interest rate risk, and liquidity risk. As a general rule, the price of a T-bills moves inversely to changes in interest rates. When we look at history, we can see that there have been several bull markets that have bounced back nicely from previous bear markets. Here are a few of the bull market examples from the last 50 years.

For example, stocks entered a bull market in March 2009, amid the Great Recession, and lasted until COVID-19 effectively shut down the world economy in March 2020. Then, with the help of massive fiscal and monetary stimulus, a new bull market emerged. Mr. Silverblatt’s definition of bull and bear markets builds in some room for doubt. But even once a bull market has been declared, using his definition, it’s not obvious how that ought to affect your investment portfolio. For investors who hold the broad market through low-cost index funds, as I do, the simple 20 percent definition means that you have lost money since the market peak.

It’s sometimes called an “official” definition, though it’s nothing of the sort. Jeff Sommer is the author of Strategies, a weekly column on markets, finance and the economy. We are all participants in the economy, and each of us may be impacted differently. But knowing that a phase will end and a new one will begin can help you make sound investment decisions. Although there aren’t any rules on how long each phase may last, they do not last forever, transitioning to the next stage after it runs its course in a bullish market. President Reagan’s fiscal policy, known as Reagonomics, hinged on the Economic Recovery Tax Act (ERTA), which reduced marginal tax rates in order to incentivise production.

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. 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. The term ‘bull market’ is usually used to refer to the stock market, but it can also be applied to bonds, currencies, commodities and anything that’s traded. Bull markets are triggered when there’s a lot of demand – when people want to buy.

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Companies that sell products directly to consumers (as opposed to industrials) 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. The term „bull“ is also believed to describe how confident investors „charge“ the market, much like how provoked bulls tend to charge at full speed toward their opponents. The best investment apps offer a range of investment options (including stocks, bonds, and cryptocurrencies) and market access.

bull market definition us history

Reuters, the news and media division of Thomson Reuters, is the world’s largest multimedia news provider, reaching billions of people worldwide every day. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world’s media organizations, industry events and directly to consumers. „In 2008, the S&P hit its low on Nov 20, we then advanced by more than 20% into early January only to turnaround and set an even lower low, by March 9,“ said Stovall. The Stock Market was established as a system for selling and buying the shares of companies. The market has simply reached the highest point that it will, for some time[weasel words] (usually a few years[citation needed]). It is identified retrospectively, as market participants are not aware of it at the time it happens.

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A buy and hold/trend following strategy involves purchasing additional shares as stock prices rise. Bull markets generally occur when the rate of employment is high, there is a strong economy, and there is low inflation. Consumers spend more, which means that businesses experience an increase in profits and contribute more to the economy.

After taking a beating during the Great Recession (2007 to 2009), 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%. In these prime post-war years, the S&P 500 rose 267% over 86 months, which works out to a commendable annualized return of 20%. On the home front, consumer goods to fuel the Baby Boom were the main driver, while a strong export market also helped companies grow.

Initially this was hailed as the end of the bull market and start of a bear market, but the market turned back up. A bull market begins when investors feel that prices will start, then continue, to rise; they then begin buying stocks in the hope that they are right. This belief and the actions that follow cause stock prices to rise again. If prices fall 10% or less, it is considered to be a market correction. At 20%, the bull market is mourned by investors as the bear market begins.

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There are a few options to consider when investing in a bull market. While each investor’s strategy may vary, here are some common things people do during bull markets. Opposite of a bull market, a bear market is when the market goes down and the value of stocks and bonds decrease. Investors tend to lose value in their portfolio and this also translates to a lack of confidence in the market. Despite the inevitable dips, over an extended time horizon, the stock market has never failed to rise.

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  • When we look at history, we can see that there have been several bull markets that have bounced back nicely from previous bear markets.
  • Many of the stock runs in the meantime resulted from the strong performance of the bond market​​.
  • 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.

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this post may contain references to products from our partners. Any estimates based on past performance do not a guarantee future performance, and prior to making any investment you should discuss your specific investment needs or seek advice from a qualified professional. I try to square that circle by always being bullish about investing for the long run, and nervous about what might happen over the next week or month or year. Paradoxically, I’m not even sure that I hope we’re in a bull market.

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Characteristics of a bull market

Bull markets are said to end when prices fall 20% from their near-term peak. Investors and analysts therefore cannot know when a bull market will end until after the event. Bulls, meanwhile, are thought to symbolise purchases expected to increase in value.

bull market definition us history

After the October 2022 low point, the stock market was able to recover some of its losses in the fourth quarter. „Since more people work, they can invest money in the market for long-term planning on whatever they choose.“ Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. At Bankrate we strive to help you make smarter financial decisions.

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Investors who were holding onto certain stocks and bonds may even consider selling them while the values are high or making a strategic trade. Prior to the latest one, there was a lengthy bull market that lasted https://g-markets.net/helpful-articles/what-does-hawkish-mean-definition-meaning-and/ from 2002 until the late-2007 bear market that coincided with the financial crisis. The bottom line is that bull markets tend to be several years in length and are always preceded by and ended by bear markets.

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