If you ever need to remember what the term bull market means, just think of the famous charging bull on Wall Street. Because a bull’s horns strike upwards, this term refers to a market in which stock prices are similarly rising over a period of time.
In a bull market, investor confidence levels are pretty high. They’ve been working out, look toned and feel happy looking in the mirror. It can be an optimistic time and can sometimes be sustained for months or even years.
How do you know when you’re in a bull market? Generally it means stocks have risen 20% after a period of decline. They are hard to predict though, and similar to being charged by a bull, you usually only know it’s happening when you see it charging towards you.
In a bull market, the economy is strengthening or it’s already pretty strong to begin with (imagine that!). Usually it means the GDP is strong and unemployment is down. Corporate profits go up and the overall demand for buying stocks is pretty high as well. The number of Initial Public Offerings (IPOs) will go up as well.
However, not everything is sunshine and roses. Supply and demand for stocks will go up and down during this time. There are a lot of people looking to buy stocks but fewer people looking to sell, creating a gap in what’s available.
The opposite of a bull market is a bear market, which is shrouded in pessimism and falling prices in stock. Poor bears. Bear markets eventually lead to bull markets, all part of the four phases of the economic cycle or the circle of life for stocks.
A bull market is in effect so drinks are on me!