Reviewed by Sep 30, 2020| Updated on
What is a Bull Market?
A bull market is a situation of securities group's financial market in which prices rise or are expected to rise. The term ""bull market"" is most commonly used to refer to the stock market, but it can be used with anything tradeable, such as real estate, bonds, currencies and commodities.
Because securities prices rise and fall substantially continuously during trading, the term ""bull market"" is typically reserved for long periods of raising a large portion of security prices. Over months or even years, bull markets continue to last.
Breaking Down Bull Market
Bull markets are marked by investor confidence, optimism, and long-term expectations that strong performance should continue. It is hard to predict changes in market trends consistently. Part of the problem is that sometimes psychological effects and speculation can play a major role in the securities market.
There is no specific and universal metric used to identify a bull market. Nevertheless, perhaps the most common definition of a bull market is a situation where stock prices rise by 20 per cent, usually after a 20 per cent drop and a 20 per cent drop before a second drop. Because bull markets are hard to predict, analysts typically can only recognize this phenomenon after it occurs.
The era between 2003 and 2007 was a major bull market in recent history. During this time, after a prior downturn, the S&P 500 increased significantly; as the financial crisis of 2008 came into effect, after the bull market period, large declines occurred again.
Characteristics of a Bull Market
Bull markets usually occur when the economy grows stronger or when it's already strong. They tend to occur in line with a strong gross domestic product (GDP) and a drop in unemployment, often coinciding with an increase in corporate profits.
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