Bull Market

A bull market is defined as a financial market in which prices are rising or are expected to rise.

This designation is most commonly used in the stock market, though can also be applied to other markets as well, including real estate, foreign exchange, commodities, etc.

A bull market differs from periodic rises in assets by virtue of its duration, not frequency.

For example, a bull market will typically see extended periods during which large numbers of stock share prices are rising over months, or possibly even years.

Bull Markets Explained

Like any asset, movements are driven by speculation and by extension optimism. In the case of bull markets, investor confidence is strong and a driver of assets in an upward direction.

Of course, there are multiple factors at work with any sustained or directional push of asset prices. This includes speculation, psychological effects, and other external stimuli.

Oftentimes, bull markets do not have a definitive start or end point, nor do they utilize any specific metrics in their identification.

A common axiom however in the case of the stock market can help classify a bull market. For example, if stock prices rise by 20%, typically after a drop of 20% and before a second 20% decline, then it can be surmised that a bull market exists.

Despite its difficulty in forecasting, there are also factors that can help facilitate a bull market as well.

Bull markets commonly take place when the economy is growing or during periods of strength.

This is supported by strong gross domestic product (GDP) readings and a sustained drop in unemployment or rises in corporate profits.

Investor confidence is also a notable determinant, which tends to have a sustained climb during a bull market period.