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  • A bull market is an extended period when prices for stocks or other assets are steadily on the rise, usually during the expansion phase in the business cycle.
  • Bull markets are usually accompanied by high investor confidence and a strong overall economy. 
  • Trying to time a bull market is harder than it looks, and most investors should stick to their long-term strategy and goals. 

If you’re interested in investing, you’ll notice the phrase “bull market” often comes up in common parlance. “The bulls were out today,” says some strategist on TV or Twitter. But what is a bull market? And how does it affect you?

Let’s break down what bull markets are, how they differ from a bear market, and what they mean for institutional and individual investors.

What is a bull market? 

A bull market (aka a bull run) is a long, extended period in the market when overall stock prices are on the rise.

“Bull markets happen when the economy is strengthening, and stock prices are rising,” says Teresa J.W. Bailey, CFP and senior wealth strategist at Waddell & Associates

There’s no formal metric that defines a bull market. But one common rule of thumb is a 20% stock price increase from the most recent low, with signs that prices will continue to grow.

“Unemployment in the black African American community is lower than it has been in the past,” says Christian Nwasike, principal & executive managing partner at Practice Management Consultants, LLC, and chairman of the board of the Association of African American Advisors. “Since more people work, they can invest money in the market for long-term planning on whatever they choose.”

The term is often applied to the stock market, as measured by the major indexes:

But bull markets can apply to any market, from individual stocks to other assets such as real estate, bonds, and currencies.

How long do bull markets last?

It’s impossible to predict exactly when a bull market will end. But it always does, after an external force affects investors’ feelings about the future and stock prices start to look too pricey. Plus, no two bull markets are the same.

As the old saying goes, bull markets don’t die of old age. They die when the market changes fundamentally, prices rise too high or fast, or some other event deflates investor confidence. Because it’s impossible to tell when a market has reached its top from a ground-level perspective, it’s very difficult to foresee the turning point before you are in it. Of course, that doesn’t stop investors from trying.

“Markets move quickly. Historically, we’ve seen markets move as much as 9 or 10% in one day,” says Bailey.

Characteristics of a bull market

Though the two don’t always move in strict tandem, bull markets often reflect an “up” period in the general economy — specifically, the expansion phase of a business cycle, when GDP is increasing, as well as consumer spending and industrial production.

The main characteristics of a bull market include: 

  • Increase in investor confidence: With stock prices increasing, investors are convinced they’ll keep doing so, so they keep buying. This further increases stock prices due to supply and demand. 
  • Companies bet more on their future: Buoyed by consumer buying, businesses focus on expansion and invest in themselves.
  • Unemployment rates go down: With companies expanding, they hire more employees, decreasing unemployment. Average wages go up as companies compete for workers. Workers are also more likely to look for a job since they have a better chance of finding one that pays them more than their current job. 
  • Money is easier to spend: Increased wages mean customers have more money to spend. After all, it feels like getting more will be relatively easy. 
  • And that means risking excessive inflation: All that excess money can increase the price of goods.

How to invest in a bull market

Wondering how prudent investors act in a bull market? Here are some tips: 

1. Don’t try to time the market

It’s almost impossible to tell when the market is at its peak, and even professionals rarely manage to call it right. Not only can you sell too late, but you might also end up selling way too early and missing out on future profits.

Generally, it’s better to enter and leave the market gradually, without drama, rather than selling all at once because you’re convinced the market has reached its top. Depending on your financial goals, you’re investing strategy can change. 

“There are a lot talking heads in the marketplace that speculate and it’s very difficult to follow speculative advice if you don’t necessarily have an idea of what it is you’d like to accomplish,” says Nwasike. 

If you follow a buying strategy like dollar-cost averaging, stick to it.

2. Stay diversified.

Going all-in on a hot stock or sector can be tempting when the market grows, but the end may be closer than you think. If you’ve only bought the biggest so-called winners, you may find that their pumped-up prices evaporate the quickest.

“Always diversify,” says Nwasike. “I would recommend for anyone that wants to do it themselves, diversify your portfolio as the first strategy. And then monitor regularly. Every 30 days, look at your positions and rebalance how much money you have invested in each of those asset classes.”

A super-strong bull market can make even weak companies appear like sure things — until they aren’t. Be sure you know what it means to diversify effectively, and remember that knee-jerk reactions to news about individual stocks or companies aren’t the best way to figure out where to invest.

3. Pay attention to the all-mighty consumer 

Companies that sell products directly to consumers (as opposed to industrials) have proven themselves over decades. Bull markets in recent years have tended to be powered by such companies, but more importantly, they may be a decent safe harbor during downturns as well. Consider investing in these equities or a large-cap mutual fund with such stalwarts. 

What causes a bull market?

A bull market tends to occur when the economy is strengthening from increased business investments and higher consumer spending. As people spend more on goods and services, businesses can generate more revenue, create jobs, and invest in new technologies. 

The more the economy can grow, the longer the bull market can run. However, as spending and production increase, the prices of goods and services can inflate. Too much inflation can end up hurting the economy.

Bull markets vs. bear markets

A bull market is the opposite of a bear market, which happens when stock prices fall 20% from their latest peak. The nomenclature makes it easy to remember the difference: When provoked, bulls charge and are known for running at great speed, and so they became a symbol for a surging stock market.

In contrast, surly, defensive bears are associated with hibernating — hence, it became an ideal metaphor for a declining or sluggish stock market.

Bear markets vs. bull markets, on average, last less than 10 months and occur during times of crisis or struggle. On the other hand, bull markets generally last, on average, 2.7 years and occur during times of economic growth and optimistic investor outlooks. 

Historic bull markets

The length of any given bull market is informed by the factors of its time — a concept made clear if you take a moment to examine some of the biggest bull markets in history:

Post-World War II Rally: June 1949 to August 1956

In these prime post-war years, the S&P 500 rose 267% over 86 months, leading to a commendable annualized return of 20%. On the home front, consumer goods to fuel the Baby Boom were the main driver, while a strong export market also helped companies grow.

The Federal Reserve raising interest rates and international tension stopped this bull’s run, beginning a bear market phase. However, the market was back in bull territory by 1957.

The Housing Boom: October 2002 to October 2007

The Housing Bubble was a dramatic growth in the real estate sector that began after the federal government deeply cut interest rates in hopes of encouraging investment. The financial institutions that encouraged home financing, real estate investing, and mortgage trading did extremely well until interest rates started to climb again. Subprime borrowers also began defaulting on their loans, leading to the subprime mortgage crisis.

The bull market ended in early October 2007 as stocks peaked, marking the start of a recession. A bear market arrived the following summer. 

The Longest Bull Run in History: March 2009 to March 2020

This record-breaking bull market lasted 131.4 months (nearly 11 years), making it the longest in history.

After taking a beating during the Great Recession (2007 to 2009), the S&P 500 gained over 400% after a low of 666 points on March 6, 2009. On February 12, 2020, the Dow Jones Industrial Average reached a record high of 29,551 points. The gains for the S&P alone amounted to over $18 trillion on paper, and unemployment was at a 40-year low, under 4%. 

But just a month later, on March 11, the Dow lost over 20% of its value, falling to under 19,000. The S&P 500 and the Nasdaq were pounded soon after. The most obvious cause? The global spread of the new Coronavirus brought widespread fears over economic and social damage, as businesses shuttered and millions of people were thrown out of work. 

How raising the debt ceiling could affect the stock market

The Senate voted to pass the Fiscal Responsibility Act on January 1, 2023, which would suspend the debt ceiling through January 2025. This deal would also restrict 2024 and 2025 spending. Potentially, this could leave the stock market in a tentative state of increased volatility as an individual’s creditworthiness is weighed down. In turn, this may increase future borrowing costs and expenses. 

A similar event occurred in 2011 when the US government teetered toward an “X-date” (an estimated time at which the US government cannot continue paying bills). Three weeks after passing the debt ceiling raise, the S&P 500 market index dropped by 12%.

Bull markets — Frequently asked questions (FAQs)

A “bull” market describes a stock trader’s confidence in a market “charging” forward, similar to how a provoked bull charges full speed at enemies. As prices rise, traders hold high expectations and trade more aggressively. 

The average stock market return for the S&P 500 during a bull market is 184%, with the average bull market duration being 1,964 days. 

 Yes, in 2024 we are in a bull market. The low point of October 2022 marked the beginning of the bull market run and is expected to last at least a few years. Keep in mind that the stock market is unpredictable, so how long this bull market will last is purely speculative. 

Are we in a bull market in 2024?

Stock traders are officially running with the bulls as the S&P 500 skyrockets amidst enthusiasm for artificial intelligence (AI) in mega-cap tech stocks like Nvidia, which has surged 264% over the last year. January 2024 is the first time the S&P 500 reached a record high in two years. After the October 2022 low point — the definitive start of the bull market — the market made a remarkable 42% recovery with the help of the AI boom and bullish tech sector. 

Stock traders can expect more stock growth in their portfolios, especially for folks largely invested in tech stock powerhouses like Nvidia, Alphabet, and Amazon. Some stock experts believe the S&P 500 is expected to rise another 99% over the four years. But not everyone is as confident in this prediction. 

However, it’s important to remember that the stock market is unpredictable, and while history tells us that a bull market can last for many years, there’s no guarantee. Therefore, it’s best to think long-term, thoroughly research potential investment opportunities, frequently rebalance your portfolio, and diversify your asset allocation to match your goals.