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February 6, 2023
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What Is a Bull Market? Causes and History The Motley Fool

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  • Mei 24, 2022
  • 10 min read

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 dowmarkets increase their overall revenue. 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.

  • When the stock market is on the rise, more and more people start investing in getting in on the action.
  • This video will help you get started and give you the confidence to make your first investment.
  • At this point, the market becomes hot again for all investors, and informed investors start to scale back their positions, selling them off to new market entrants.
  • 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.

Any that pass through economic cycles and can either gain or lose value over time. A bull market is an extended time period of stock values increasing and the overall stock market rising. A bear market is the opposite, a time period of stock market decline. 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.

What is more, during positive economic growth, more private companies likely issue an initial public offering, and an increase in IPO activity would then further grow a bull market. The chart below shows how bull markets can last for years, but the average growth remains around 6% throughout. Bull markets often coincide with a strong economy and optimistic market sentiment; investors have a more positive outlook when inflation keeps a steady pace. This term is thought to have come from the idea that bulls thrust with their horns upward, whereas bears swipe their claws downward.

What exactly is a bull market?

The big question now, of course, is whether this 10-year rally will continue. Bull markets end with recessions, and while we’ve seen many bumps on the road to where we are now, the stock market has managed to recover each and every time. There will always be serious risk factors and fears that pervade markets. Registered only as a relatively limited and short-lived blip in the U.S. markets. Finally, when the Federal Reserve began to raise interest rates in earnest around the end of 2016 into 2017, the stock market took it in stride and continued to rise sharply. The current bull market that started in March 2009 is the longest bull market in history.

In addition, the main differences between bull and bear markets, define secular and cyclical bull markets, and discuss some investment strategies prevalent in a bull market. Just as bull markets are characterized by optimistic investors willing to take risks, rising share prices , and a strong overall economic climate, a bear market takes the opposite path. Pessimistic investors sell their stocks, pushing share prices even lower, causing panic, and further pushing the market down.

bull market us history definition

Dwindling market confidence, declining corporate profitability, and recessions are all common occurrences during Bear markets. Stock markets were soaring between August 1982 and 1987, with the S&P increasing by +219%. Ronald Reagan cut taxes which initiated the steep increase in prices. The S&P 500 generated the best returns since the Great Depression, and unemployment was low. Later, the market crashed with the Suez Canal crisis and the Soviet Union’s invasion, causing a dip – a minor bear market amidst the S&P 500, which fell by 22%.

How Does a Bull Market Work?

The High-Low Catalog turns up when that moves over a 20-day SMA and becomes down in order to moves below the 20-day SMA. New levels are increasing and new lows are decreasing when the particular High-Low Index goes up. New highs usually are decreasing and/or fresh lows are growing if the High-Low Catalog falls. The High-Low Index is a breadth indicator centered on Record High Percent, which is usually based on new 52-week highs and fresh 52-week lows. Typically the Record High Percent equals new highs divided by new highs plus new lows.

Part of the difficulty is that psychological effects and speculation may sometimes play a large role in the markets. A bull market is a period of time in financial markets when the price of an asset or security rises continuously. The stock market’s average annual return from 1926 to 2021 was 12.3%.

bull market us history definition

Chart 2 shows the NY Amalgamated with the NEW YORK STOCK EXCHANGE High-Low Index ($NYHILO) as well as 20-day SMA. 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. In the post-war years, US president Eisenhower balanced the US federal budget, and consumerism proliferated. Americans purchased more goods, particularly cars and televisions, and had more children, leading to what is called the Baby Boom.

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It will rage on all week and beyond, into the next bear and bull market cycles. Between March 2009 and the same month 11 years later, Know how to start drone software development the S&P 500 gained over 400.5% at a CAGR of 16%. The run ended in March 2020 when the coronavirus pandemic ravaged global markets.

The most widely used numerical target to determine a Bull Market is when general stock values gain 20% after two declines of 20% each. “Stocks are at an all-time high. Here’s what stopped the last 12 bull runs.” Other market drops were triggered by freakish circumstances, including the 2010 ‘flash crash’ and the ‘Volmageddon’ volatility eruption in early 2018. The chart below displays some of the most salient market, economic, and political events that have helped to move the S&P 500 in one direction or another during this remarkable decade-long run. To the best of our knowledge, all content is accurate as of the date posted, though offers contained herein may no longer be available. The opinions expressed are the author’s alone and have not been provided, approved, or otherwise endorsed by our partners.

Why is it called a bull market?

This impacts the economy by boosting the value of the companies and increasing the value of individual portfolios of common investors. 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. This bull run was curtailed in part when the Fed raised interest rates and investor confidence was shaken by international tensions. A bull market, or a bull run, is an extended period of rising stock prices, as measured by major indices like the S&P 500, the NASDAQ Composite, and the Dow Jones Industrial Average. Although people usually use the term in reference to the stock market, the term can apply to real estate prices, bond prices, commodities—any asset that can be bought and sold.

Banks folded, the government was forced to intervene and bail out the U.S. banking system, and the bull market ended in October 2007 as a recession began. Meanwhile, the bull market following the Great Depression is close behind our current bull market. The Great Depression bull market started in June 1932, lasting 57 months, with the S&P 500 posting a 325% gain over that time. Investing in different asset classes can help protect yourself from losses if the stock market declines. A diversified portfolio can include a range of stocks in different industries and a mix of other securities like bonds. Or, you may invest in index funds that allow you to invest in hundreds of companies at once.

Bronte is currently the Director of Marketing at PaymentCloud, a merchant services provider that offers hard-to-place solutions for business owners across the nation. The United States had used its manufacturing strength to win the war, and this ability to be productive yielded solid results for both export and domestic markets. While the government no longer needed the same number of weapons, the factories used to supply the military could now be reconverted into hubs for producing consumer goods. Low unemployment figures, GDP growth, and other factors can stabilize a market.

And these moods, bullish and bearish behaviors, reflect the investors’ sentiment towards their own buying and selling behavior. Three major stock market indexes are Dow Jones Industrial Average, the S&P 500, and the NASDAQ. Usually, all three would show signs of rising stock market indexes simultaneously, driven by economic health and investor sentiment. A bull market is a reflection of the current economic and business environment.

Positive trends are driven by high investor confidence in the security to deliver returns. In the case of stock markets, it means investors believe that companies will generate profits and pay dividends. Therefore, bull markets usually coincide with strong periods for their relevant economies, characterised by rising economic indicators such as gross domestic product and employment figures. A market that is experiencing a long-term decrease in prices is called a bear market. Bear markets generally occur when there is high inflation and unemployment, and when the economy is not doing so well (i.e. there is a recession).

Information provided on Forbes Advisor is for educational purposes only. Your financial situation is unique and the products and services we review may not be right for your circumstances. We do not offer financial advice, advisory or brokerage services, nor do we recommend or advise individuals or to buy or sell particular stocks or securities. Performance information may have changed since the time of publication. For example, you might invest $100 weekly, regardless of what the stock market is doing. By doing this, you’re buying more shares when the price is low and fewer shares when the price is high.

The image below shows a trend observed by the Dow Industrials between 1949 and 1956, presenting a zig-zag line but generally swinging upward over a long period. This trend includes numerous market corrections, as well as brief bear markets. However, the general trend was trending upward over those 86 months. If businesses improve their profitability, it shows potential and encourages investors to buy their stocks, lured by a high return on investment.

Ronald Reagan’s tax cut boom – 1982 to 1987 (60 months)

Businesses went public without a proper business plan, product, or record of profitability yet still managed to secure investments. The Internet era in the 90s started the second-longest bull coinspot review 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.

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