Bull market meaning
What is a bull market?
When prices rise consistently for a period of months or years, a bull market can form. Although this term is commonly used when describing the stock market, “bullish” tendencies can be seen in other assets such as real estate and foreign currencies. It signals that traders are optimistic about the current economic climate, and anticipate further growth ahead.
How is it measured?
Experts haven’t agreed on an official way of identifying a bull market – but there is a widely accepted definition known as the “20% rule.” If stock prices rise by 20% from their latest low point, and continue rising for at least six months, the market could be entering bullish territory. Bull markets end when prices fall by 20% from their recent high point. A continuing downwards trend is known as a bear market.
Bull markets are often only confirmed in hindsight because it is difficult to know their exact dates until a 20% drop brings them to an end.
How long do bull markets last?
The S&P 500 index, based on the market capitalizations of 500 large companies usually listed on the New York Stock Exchange or NASDAQ, is often used for measuring bull markets.
On average, they last for about four-and-a-half years. As of mid-2019, the US was in the throes of the longest bull market in its history – with the S&P gaining more than 300% compared with the aftermath of the financial crisis in March 2009. The bull market with the biggest gains started in October 1990 and lasted for 113 months, and saw the S&P rise 417%.
As bull markets advance, there can be times when prices enter decline – not enough to signal a bear market, but enough to concern investors. A fall of 10% from recent highs is known as a correction. They are common, often short lived, and can help to keep stock markets healthy.