A bull market is one in which an entire financial market or a select grouping of securities sees rising prices over an extended period of time. It is also used to describe a scenario in which prices are expected to rise. While the phrase bull market is most frequently utilized to address the stock markets, it can similarly reference any items that trade, such as sustained rising prices in commodities, currencies, or bonds. The opposite of a bull market is a bear market.
The simplest definition of a bull market is one that is rising. Bull markets are those that witness an increase in prices of market shares that is sustained for a period of time. In bull markets, investors show great confidence that this rising trend will only continue to exist over a longer term. When bull markets are in effect, a nation’s economy remains strong and employment levels prove to be higher.
Bull markets show the characteristics of high investor confidence, general enthusiasm about the future, and anticipation that strong and successful results will continue to occur. Forecasting with any certainty when such bull market trends will wane is challenging. Much of the problem lies in attempting to decipher speculation’s role and the psychological impacts of investors that can often have a major influence on the markets in general.
Bull markets in stocks commonly develop as an economic slow down is waning. They begin in advance of an economy demonstrating a convincing recovery. As investors’ confidence levels grow, they show this by their buying and investing in a belief that stock prices will gain in the future. Bull markets generally turn out to be positive and winning scenarios for most investors.
The phrase bull market is derived from the animal world, as is its opposite concept of bear markets. Bulls attack their prey by using their horns in an upward thrust, as when markets are moving up. Bears on the other hand swipe their victims down with their paws, as when markets are falling down. When the trend is rising, the market is a bull market. When it is falling instead, it is called a bear market.
Examples of bull markets abound in both the United States and developing countries. Throughout most of the 1980’s and 1990’s, the U.S. stock markets rose in a long running bull market. Prices rose by nearly ten fold in that time period. The Dot Com bubble put an end to this bull market at the turn of the century.
Around the world, there have also been numerous bull markets in foreign stock exchanges. In India, the Bombay Stock Exchange, known as SENSEX, experienced a dramatic bull market for five years from mid 2003 to the first of 2008.
In this time frame, the index ran from 2,900 points on up to 21,000 points.