A bull market is a period of high economic growth that lasts for several years. While the exact definition of a bull market is debated, many people will point to persistent high economic growth as evidence that a new bull market has begun.
However, what is considered to be “evidence” varies widely from person to person and sector to sector. For example, some investors think the technology boom of the late 1990s saw a new bull market in which they made good money by buying shares in start-up companies.
Others point to the virtual collapse of the financial industry during the Great Recession as proof that an old bear market has begun again. The truth is, we simply don’t know when a new bull market has begun; we can only wait and see.
But what we do know is that most recessions have at least some similarities with other cyclical downturns in history, such as stock markets going into a bear market at the same time or during similar historical cycles.
What is a bull market?
When it comes to the economy, one can only judge a market by its performance over time. If we look at a bull market as a sustained period of high growth, we can call it whenever we want. The economy of a certain country, no matter how wealthy it is, cannot be in a bull market unless the rest of the world is also in a bull market.
If a country’s economy is not growing at a fast pace, it cannot be a bull market. When we talk about a bull market, we are talking about a period when an economy is experiencing steady economic growth. Investors assume that economic growth will continue indefinitely, so they buy stocks that are expected to earn money in the future.
When is a bull market triggered?
Like we said above, an economy has to be growing in order to experience a bull market. However, once the growth begins, it doesn’t take long before investors get excited. In fact, it is not uncommon for an economic expansion to be sustained at around 3% growth before an investor-driven hype takes hold.
This hype can be triggered by many different factors, but the majority of the time it is caused by investors trying to figure out why a bull market is continuing instead of ending. It is not uncommon for people to start asking questions like, “Is this a new bull market?” or “Is this the end of the bull market?”
What to Expect During a Bull Market
A bull market is typically defined as a sustained period of high growth. This growth is usually followed by a hype cycle where investors try to figure out why the expansion is happening instead of ending. This is when we see the term “is this the end of the bull market?” being thrown around. During a bull market, the rise and fall of the stock market is much more extreme than it is in a bear market.
Stock market corrections, also known as bear markets, are more likely to bounce back thanks to the positive expectations of the next bull market. During this hype cycle, stock valuations often reach unrealistic levels, which leads to a correction.
During a bull market, stock prices are expected to rise, so you can make more money by buying stocks you think will increase in value. However, during a bull market, it is also very common to see stock market valuations get too high. This can lead to a correction, or a decline in stock market valuations.
Is a Bull Market Ever Beginning Again?
The idea that a new bull market is always beginning and never ending is a popular one. It is also one of the most debated topics in the stock market. Many people believe that the technology boom of the late 1990s saw a new bull market in which they made good money by buying shares in start-up companies. Others point to the virtual collapse of the financial industry during the Great Recession as proof that an old bear market has begun again. The truth is, we simply don’t know when a new bull market has begun; we can only wait and see.
Important Decisions to Make During a Bull Market
Investors in a bull market make many different decisions than investors in a bear market, but each decision is based on the same hypothesis that a new bull market has begun. The key decisions become which stocks to buy and when to sell those stocks in order to make the most of this boom cycle.
When a bull market begins, investors have high expectations for stocks, so they tend to buy shares that are expected to earn money in the future. However, as the cycle continues and investor excitement increases, stock valuations get too high and many investors sell their stocks and become bearish on the market. This is why it is so important to make decisions during a bull market, because it is very easy to get too excited and sell stocks before they are really worth anything.
Summary
A bull market is a sustained period of high economic growth that lasts for several years. And while the exact definition of a bull market is debated, many people will point to persistent high economic growth as evidence that a new bull market has begun. However, what is considered to be “evidence” varies widely from person to person and sector to sector.
For example, some investors think the technology boom of the late 1990s saw a new bull market in which they made good money by buying shares in start-up companies. Others point to the virtual collapse of the financial industry during the Great Recession as proof that an old bear market has begun again.
The truth is, we simply don’t know when a new bull market has begun; we can only wait and see. But what we do know is that most recessions have at least some similarities with other cyclical downturns in history, such as stock markets going into a bull market at the same time or during similar historical cycles.
