What Is A Bull Market?

We have just come out of the longest bull market in history, where growth and innovation were the tales of the times, but what exactly does a bull market mean?

Aug. 5, 2020

Any new investor who began their journey into the stock market in the past 11 years will be a child of the longest bull market in history. Since the Great Recession of 2008/2009, the market had been on an upward trend, with the likes of Amazon (NASDAQ: AMZN) and Netflix (NASDAQ: NFLX) emerging as the new titans of industry.

Now, that time has ended… followed by the fastest bear market in history, and now stocks are on a rampage.

What does ‘bull market’ mean?

I am so proud of my explanation of what a bear market is, that I shall use it once more here and replace the word ‘bear’ with ‘bull’:

Contrary to popular belief, a bull market is not a bazaar full of bulls buying and selling goods, nor is it a store where one can purchase a bull.

Now that I’ve gotten that out of my system, here is the exact definition courtesy of Investopedia:

A bull market is the condition of a financial market in which prices are rising or are expected to rise. 

The most common numerical definition of a bull market is a situation where the stock markets primary indices, the S&P 500 (NYSEARCA: VOO), the Nasdaq (INDEXNASDAQ: .IXIC), and Dow Jones (INDEXDJX: .DJI), all rise more than 20% over an extended period of time. 

The 11-year bull run from the Great Recession ended in February 2020 due to a global downturn caused by the COVID-19 pandemic. However, there was one brief 3 day period between 24-26 March where the market slipped back into bull territory, as the Dow jumped 21% in that time. It turned out to be nothing more than a harmless flirtation though, as the cruel mistress that is the U.S. stock market brought us all crashing back down to coronavirus-infected earth. 

What causes a bull market?

A bull market is generally the result of strong economic growth, or at least market strengthening. GDP is normally on the rise, unemployment is low or dropping, and investor confidence is climbing. 

It is essentially defined by investors becoming confident enough to buy shares in large numbers. The overall demand for stocks will be positive, along with the overall tone of the market, while it is likely that many IPOs will take place during this period. The likes of Slack (NYSE: WORK), Virgin Galactic (NYSE: SPCE), and Beyond Meat (NASDAQ: BYND) all went public in 2019 as the bull market began to peak.

Types of bull markets

A bull market can take many different forms, and generally coincides with three factors in business:

  • Increasing top-line revenue as more products are sold.
  • A consistent profit increase that isn’t at the expense of cutting costs such as labor or expansion.
  • A strong price-earnings ratio (P/E), which is how much in additional stock price investors are willing to pay for each dollar of earnings. The more paid, the more confidence is shown.

Long-term bull markets can have corrections, where the overall market falls 10% then bounces back, and remains in bull territory. In order to no longer be considered a bull market, it must fall 20% or more for a sustained period. 

We’re raging bulls…

Here at MyWallSt, we may not all be fans of the Chicago Bulls, but our investment philosophy is bullish all the way, or as we like to say: ‘Buy and hold ’til you’re grey and old’. We believe in buying stocks at any time, because if you’re a long-term investor, your investment will rise with the market over time.

If you’re getting started in your investment journey, always remember MyWallSt’s six golden rules:

1. Get started: No matter how big or small the investment. 

2. Think long-term: The buy and hold philosophy will outperform the market in the long-term.

3. Never borrow to buy: Save first, then invest. 

4. Diversify: Accumulate a minimum of 12 stocks across 6 different sectors.

5. Buy what you believe: Own part of a business you love.

6. Invest What You Can, When You Can: Get your saving habits right.

Combine this with our list of market-beating stocks, and you could be on to a winner. You can enjoy free access here and see it for yourself.

MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.