What is a bull market?
For long-term investors, seeing a bull market is a dream come true. They cheer on such a condition as they know their assets are growing.
That’s because a bull market refers to a sustained period of rising prices, which can last for months or even years.
The term “bull market” came from how a bull attacks by thrusting its horns into the air. Such an action was related metaphorically to the current market trend. If it’s up, it is considered a bull market.
A bull market commonly concerns the stock market or major indexes such as the S&P 500 or Dow Jones Industrial Average. But other asset classes and markets, like currencies, commodities, or real estate, can also be in the same situation.
During a bull market, investors would see stock prices increase 20% or more, which occurs after a 20% fall, followed by another 20% slide.
Moreover, a bull market is generally accompanied by a stable or well-performing national economy. That means a surge in the gross domestic product, a drop in unemployment, and companies’ profits are expected to climb.
Growing investor confidence is also an excellent indicator of a bull market, as you can see stronger demand for stocks and optimism in the market’s overall tone during such times.
To sum it up, you can recognize a bull market when prices of securities are trading higher, typically by 20%, investor confidence is growing, and the economy is strong or strengthening.
What goes down often also comes up. While we can never precisely predict what will happen next in the markets, we know that significant downturns are usually followed by large, sustained upswings, also know as a bull market.