The term bear had been in use prior to the breaking of the South Sea Bubble; however, the affair brought bear into widespread use. The imagery of a bull-rushing symbolizes the effect a general rise in stock markets has on investors. Confidence is high and investors “rush” into the market to buy stocks. You are probably wondering why ”bull” and ”bear” are used to describe these markets. The names come from the direction in which the animals strike their enemies. A bull attacks with its horns swinging upward whereas a bear strikes downward with its paws.

This second bull market for stocks lasted until December 2021, when the S&P 500 peaked, and then ultimately turned into a bear market. Bull markets often end with asset prices rising so fast and furiously that they end up in a bubble, with prices way out of connection with fundamentals. Asset prices may then fall as part of a market crash, an abrupt period of often just a few days when prices fall quickly.

In the stock market, bulls are speculators who believe that their investments are growing. Optimistic by nature, their can-do attitude can drive market prices higher, while their fierce determination allows them to face any short-term challenge head-on—just like their namesake. Bull markets can last for years and they can be local – one market might be ‘bullish’ while others around the world are struggling. A market bottom is the end of a market downturn, and the start of an upward trend . A market bottom is also very hard to pinpoint while it’s occurring, and investors who buy stocks during false market bottoms can get caught out if the slide resumes.

The terms “bear” and “bull” are thought by some to derive from the way in which each animal attacks its opponents. That is, a bull will thrust its horns up into the air, while a bear will swipe down. These actions were then related metaphorically to the movement of a market. Perhaps the most aggressive way of attempting to capitalize on a bull market is the process known as full swing trading. Tech stocks are having a bad few weeks on disappointing earnings reports, but investors are betting that traditional stocks like banks will lead the next bull market, The Wall Street Journal reports.

An important point to know as an investor is to understand that the U.S. economy operates in cycles of Bear and Bull Markets. Post-2008 Crisis Bull Run – Stock market indexes hit all-time highs, investing in passive indexes and funds become popular and even survive the pandemic plunge in mid-2020. Great Expansion – The 90s stability in the economy saw large job growth and was followed by the “Dotcom” investing bubble in the early 2000s. Bull and Bear Market examples have occurred numerous times in U.S. history and are part of the economic cycle.

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References to any securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. In 2001, in response to an already struggling economy, the Federal Reserve began cutting the federal funds rate in order to encourage borrowing and spur spending. Interest rates went lower and lower, causing excitement among real estate investors and bull conditions in the real estate market. At the same time, the financial institutions that supported the mortgage industry invented new loan vehicles and lowered lending standards. When stocks are rising in value across the board, journalists often reference a bull market, which the opposite of a bear market, or period of decline.

But businesses may be overvalued on paper after the IPOs, leading to market corrections or even a bear market. For example, the overvaluation of tech stocks during the Internet boom caused a dot-com bubble between 1998 and 2000. 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.

At the start of 2020, when COVID-19 sent markets downward and shut the world’s economy, this bull run was finally over. This is an example of how outside forces can wreak havoc on economies, even if previous economic conditions appear positive. Investor confidence is one of the most notable characteristics of a bull market. Investors who are confident in the market are more likely to invest their capital.

The opposite of a bull market is a bear market, when prices trend downward. Theoretically speaking, the best time to buy in a bull market is at the start of the bull run. This approach will see the most return for your money if you sell your shares at the top of the market. However, knowing that a bull run is starting is next to impossible and picking the perfect time to sell your shares is also extremely difficult. While the precise origin of the term bull market is hard to identify, the meaning may lie in the animal’s method of attack.

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Baron Rothschild once reportedly advised that the best time to buy is when there is ‘blood in the streets’. Bull markets are characterized by optimism, investor confidence, and expectations that strong results should continue for an extended period of time. It is difficult to predict consistently when the trends in the market might change. Part of the difficulty is that psychological effects and speculation may sometimes play a large role in the markets.

• The average bull market since 1932 lasted 3.8 years, far greater than the last.
• As a comparison, in a recession, money usage by banks is curbed, and interest rates of loans go up, limiting investments and leading to a bear market.
• Then, sell stocks at the right time before prices reach their peak and plummet.
• However, usually, stock prices start rising before GDP growth, one of the key indicators to show how healthy the current economy is.

Stock prices are informed by future expectations of profits and the ability of firms to generate cash flows. A strong production economy, high employment, and rising GDP all suggest profits will continue to grow, and this is reflected in rising stock prices. Low interest rates and low corporate tax rates also are positive for corporate profitability. Companies that are performing well in a bull market may also choose to reward their shareholders by increasing dividends, which can be attractive for income-focused investors.

Chart of Bear Markets

In October of 1987, the stock market crashed, resulting in more than 20% of losses in the Dow Jones in a single day. One of the most striking examples of a bull market is the post-war boom that the United States experienced after WWII. However, top-line growth alone does not necessarily indicate a strong economy. If businesses are only achieving top-line growth because they are overspending to achieve sales, this can be bad for stock prices.

A bullish or bearish behavior – these metaphors indicate price fluctuation in the market. What this means is that investors have not lost money when buying a bond because their rates of return were always positive. The indexes tracked by the St. Louis Federal Reserve all show positive returns for this period. Some may have come close to zero returns, but none crossed the line. This signified the end of a bull market in gold that started in 2000.

When is the best time to buy in a bull market?

A bull market is the inverse of a bear market, which is a downward trending stock market. 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 dynamic stop loss of demand – when people want to buy. They usually happen when economies are doing well, and unemployment is low. In a bull market, the ideal strategy for an investor is to take advantage of rising prices by buying early in the trend and then selling them when they’ve reached their peak.

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The years preceding this bull run witnessed the subprime mortgage crisis that resulted in economic loss and turmoil throughout the world. The pain caused by the economic crisis resulted in extremely low-interest rates and other favorable economic conditions. The access to cheap capital allowed businesses to invest and corporate earnings improved.

This record-breaking bull market lasted 131.4 months , making it the longest in history. After taking a beating during the Great Recession , 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%. Bull markets are usually accompanied by high investor confidence and a strong overall economy. The value of gold decreased as the gold bear market continued for the most part from 1987 to 2001, after which gold experienced some spectacular bull runs.

The term “bull market” is most often used to refer to the stock market but can be applied to anything that is traded, such as bonds, real estate, currencies, and commodities. The cause behind prices rising in a bull market depends on the individual bull run. In many cases, a bull evidence based technical analysis run is the result of low-interest rates, investor confidence, business-friendly regulatory environments, market stability, and a host of other conditions. In 1990, a bull run began due to favorable corporate earnings results and the introduction of various tech companies.

A positive note on Bull vs. Bear markets is that Bull Markets typically last much longer than Bear Markets do, giving investors hope and confidence in long term holdings. Before investing, consider your investment broke millennial objectives and Titan’s fees. The rate of return on investments can vary widely over time, especially for long term investments. One smart thing to do is learn the principle of dollar-cost averaging.

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He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem. Globalization resulted in an increase in trade across the world and has made international investment more prevalent. He’s written for publications that include Budget Travel, Fox News, Fodor’s, and New York and BlackBook magazines. He’s edited for Fodor’s and Moon guides, and also helped copyedit the website of one of the largest law firms in the world.