Wall Street investors use slang and jargon to describe the state of the stock market and the economy. A “bull market” is a popular term stock traders use to describe a long, extended period when stock prices rise and investors’ outlook is optimistic. Such optimistic market trends lead to robust economic growth, inspiring investors to invest in volatile assets like stocks. If a new government reduces interest rates, cuts taxes or mitigates regulation, this market boom can fuel financial market growth and greater investor optimism.
What Is a Bull Market? Characteristics and Historic Bull Markets
The S&P 500 has increased over 63% over the last few years since its low point on October 12, 2022. During the final quarter of 2024, three major market indexes (Dow Jones, Nasdaq, and S&P) reached record closes. The Housing Bubble coincided with dramatic growth in the real estate sector that began after the federal government deeply cut interest rates in hopes of encouraging investment. The financial institutions that encouraged home financing, real estate investing, and mortgage trading did extremely well until interest rates started to climb again.
Historic Bull Markets
Subprime borrowers also began defaulting on their loans, leading to the subprime mortgage crisis. Bull markets are defined as a period of rising prices and optimism over a continuous period of time. As share prices are expected to rise and that fuels and empowers the economy. Most companies are unable to report great benefits because customers are not spending nearly enough.
- The Federal Reserve raising interest rates and international tension stopped this bull’s run, beginning a bear market phase.
- There are several other types of investing strategies typical for a bull market.
- However, it’s crucial to understand that bull markets don’t rise in a straight line.
However, the general trend was trending upward over those 86 months. A bull market is a reflection of the current economic and business environment. If an overall business climate improves, naturally, it raises more interest in investors. In a growing and healthy economy, companies tend to increase their bottom line and profitability. When the stock price to each dollar of earnings per share starts to rise, investors tend to start selling their shares because if the earnings drop, the P/E ratio rises.
- The term “bull market” is thought to have come from how a bull attacks, with the term “bear market” following the same line of thinking.
- Bull markets are periods—typically multiple years—when stock prices generally rise in the long term.
- Both investor psychology and stock market performance depend on each other.
- However, already on the 7th of April 2020, markets re-entered a bull market showing signs of recovery.
We use cutting-edge AI models to forecast future prices for stocks and crypto. But just a month later, on March 11, the Dow lost over 20% of its value, falling to under 19,000. The global spread of the new Coronavirus brought widespread fears over economic and social damage, as businesses shuttered and millions of people were thrown out of work. In these prime postwar years, the S&P 500 rose 267% over 86 months, leading to a commendable annualized return of 20%.
High Investor Confidence
After the stock market has endured a sustained downward trend, investors tend to have overly dour expectations—a sign of pessimism. When prices begin to rise consistently, skepticism begins, as folks are hesitant to invest again. Despite widespread skepticism, in a bull market, companies continue to beat overly dour expectations and more investors step into the market as prices continue to rise, creating optimism.
However, global stock markets recovered at a remarkable rate, and the crash ended only a few months later, on the 7th of April 2020, when global stock markets entered a bull market again. The longest-ever bull market started in 2009 after the housing crisis, and it ended abruptly with a sudden Covid-19 pandemic-induced stock market crash on the 20th of February 2020. The US stock market has been on a bull run for approximately two years and shows few signs of slowing.
What is the difference between a bear and a bull market?
A ‘bull market’ refers to a market that is “on the rise and where the conditions of the economy are generally favorable,” said Investopedia. Commonly, this rise is “defined as a 20% or more increase” in asset prices “from their most recent low,” though it can also “refer to a price spike in a specific market,” said Bankrate. A crucial question the administration should ask is why the Fed thinks that manipulating interest rates is the best instrument to influence economic activity and fight inflation. After all, interest rates skyrocketed in the 1970s and early 1980s as inflation soared upward. Interest rates came down sharply after the summer of 1982, as inflation plummeted. Ultra-low and even zero or negative rates after the 2007–09 economic crisis didn’t stimulate an economic boom.
We do not include the universe of companies or financial offers that may be available to you. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services. Not coincidentally, these are among the fundamental causes of a bear market.
Markets
Bull markets often end with asset prices rising so rapidly that they become inflated and disconnect from fundamental metrics. Asset prices may then fall as part of a market crash, an abrupt period of often just a few days when prices fall quickly. The crash may lead to a more forceful downturn and, ultimately, to the sustained downturn of a bear market.
Responsible Investing
Bull markets typically occur with a growing economy, as rising corporate profits translate into rising stock prices. Higher profits and the expectation of still-higher profits can fuel investors’ expectations, causing them to bid up asset prices as long as the future looks bright. For starters, they generally happen during periods when the What Is Ethereum economy is strong or strengthening.
During this time, consumers seem to be more optimistic about the future and become ready to spend as investors become confident like bulls. Wall Street investors use jargon and slang to illustrate the state of the economy and stock market. A “bull market” is a widely used term stock traders use to demonstrate a long, extended period when stock prices get higher and investors’ viewpoint is optimistic.
President George Bush’s economic team thought the same thing in the early 2000s, and that led to the disasters of 2007–09. President Trump and Miran are right that the cost of borrowing money is overpriced. Our rates are higher than those of Japan and the EU and are about the same as Britain’s. This is absurd, given that our fundamentals are so much better than those economies’.