Bull Market

Bull Market

A bull market occurs when prices are increasing. This article will explore the traits of bull markets, how you can spot them and what they mean for you as an investor.
By: Harry Atkins
Harry Atkins
Harry joined us in 2019, drawing on more than a decade writing, editing and managing high-profile content for blue… read more.
Updated: Jan 21, 2022
0/5 Star rating
6 min read

You’ve just learned why prices rise and fall in the stock market. Time to dive deeper into this topic with the biggest of all predictors: bull and bear markets.

I. What Is a Bull Market?

A bull market is a pronounced uptrend for a financial market that lasts for months, and often for years. While bull markets can occur in bonds, commodities, and other financial assets, in this case we’re referring to the stock market. When we say stock market, we’re referring to key worldwide indexes such as: 

  • The S&P 500
  • The Dow Jones Industrial Average
  • The Financial Times Stock Exchange 100 (FTSE)

When those indexes see big gains over an extended period of time, that’s a bull market. Let’s take a closer look at the key traits of bull markets, and what causes them.

II. How Do We Know We’re in a Bull Market?

Typically, we define a bull market as starting with a 20% rise in stock prices, following a decline of at least 20% before it. There have been 13 bull markets since the end of the Great Depression. The four biggest bull markets since that milestone are:

  1. 2009-2020 Bull Market. When U.S. President Barack Obama bailed out failing banks and launched an economic stimulus program, the market responded by shaking off the financial crisis and surging higher. The S&P 500 ended up quadrupling over the next 11 years.
  2. Post-War Recovery. With war rations ending, peace setting in, a baby boom arriving, and aggressive infrastructure programs starting, the United States enjoyed an extended run of prosperity after World War II. Starting in June 1949, a bull market propelled the S&P 500 up 266% throughout 86 months.
  3. Recovery from the Great Depression. The stock market crash of 1929 brought the Roaring ‘20s to a screeching halt, ushering in the start of the Great Depression. Starting in June 1932, the S&P 500 soared 325% over 57 months. Aggressive currency devaluation, monetary expansion, and government stimulus spending helped make it happen. 
  4. Roaring ‘90s. Buoyed by a boom in the technology sector, the economy and the stock market both took flight in the 1990s. The most profitable bull market of all time started in October 1990, lasted more than nine years, and delivered a mouthwatering 417% return.

III. Common Traits of a Bull Market

Bull markets typically occur when the economy is strong, and/or getting stronger, as defined by key factors such as gross domestic product (GDP) growth, jobs growth, and corporate earnings growth. Investor confidence will rise during a bull market. That will in turn trigger more aggressive corporate ambitions, such as a spike in the number of initial public offerings (IPOs). 

The bull market of 2009-2020 was a bit more complicated. The financial crisis of 2008 triggered a stock market crash and panic on Wall Street. But the U.S. government acted quickly to bail out big banks and enact a huge economic stimulus package. Those factors stabilized the banking industry and shoved stocks into what became the longest bull run in history. 

IV. Strategies in a Bull Market

While a bull market is defined as a run of 20% or more following a big decline, that doesn’t mean that stocks are going to go up every day. Even in a big uptrend you’ll still see sellers, whether they’re motivated by fear that the good times will soon end, or that they simply want to take some profits. 

One common approach during a bull market is buy and hold. The idea behind buy and hold is to stay disciplined in your investing approach, and hold onto your shares even when the market fluctuates. Fluctuations are normal, and shouldn’t knock you out of your positions if your goal is to hold for the biggest gains possible. 

If a bull market becomes especially powerful and long-lasting, you might even see bigger pullbacks along the way. This leads to another strategy that can pay off during bull markets, which is to buy on dips. Here, when corrections occur during a bull run, you take advantage by snatching up more shares. You don’t flee, unless ample evidence emerges that the bull run is about to end.

Finally, you can use an increased buy and hold strategy, also known as pyramiding. Here, instead of buying on dips, you’re buying more shares as the price of your stock rises. This can be a highly effective strategy during a big bull run, but it must also be done with care, where you buy fewer shares on the way up than you did with your first purchase. 

For instance, if you buy 100 shares of a stock for your initial purchase, you might consider adding 10 or 15 shares at a time each time you implement the pyramiding strategy. That way, if the market turns south, the size and strength of your initial position will still ensure gains.

V. Swing Trading or Day Trading in a Bull Market

If you prefer short-term trading to long-term investing, that too can be a winning strategy during a bull market. In this case, you’re following the market closely every day throughout the day, and looking to take advantage of shorter-term price swings to make quick profits. This can even include short-selling, in which you bet on the price of a stock to go down. That might seem counterintuitive during a bull market, but remember, fluctuation will still occur, even during a healthy bull run.

VI. How to Know when a Bull Market is Over

By definition, a bull market ends when a 20% drop in stock prices follows that 20% (or larger) uptrend. However, you can start to see signs of a bull market unraveling before that. Such signs can include increasing weakness in the economy (i.e. slowdowns in GDP and jobs growth), earnings shortfalls among market-leading stocks, and signs of technical weakness like market averages falling below key price levels. Those price levels can include numerical milestones or moving averages, which are lines that follow longer-term market price movement, in denominations of 50 or 200 days. 

Moving on…

Congratulations, you now know all the basics about bull markets. If you’re ready to jump to the next lesson on bear markets, keep reading. If you’d like to learn more about general stock market theory first, peruse the other articles on our site. 

Fact-checking & references

Our editors fact-check all content to ensure compliance with our strict editorial policy. The information in this article is supported by the following reliable sources.

Risk disclaimer

Invezz is a place where people can find reliable, unbiased information about finance, trading, and investing – but we do not offer financial advice and users should always carry out their own research. The assets covered on this website, including stocks, cryptocurrencies, and commodities can be highly volatile and new investors often lose money. Success in the financial markets is not guaranteed, and users should never invest more than they can afford to lose. You should consider your own personal circumstances and take the time to explore all your options before making any investment. Read our risk disclaimer >

Harry Atkins
Financial Writer
Harry joined us in 2019, drawing on more than a decade writing, editing and managing high-profile content for blue chip companies, Harry’s considerable experience in the… read more.

Related courses

Choosing the right stock to invest in needs time and care; it is never something that can be done on a whim. From the type of company you are investing in and its financial status to overall market conditions and the need to mitigate risk, there are a variety…
Investing in the stock market is one of the best ways to make money and grow your wealth. Stock investing can serve as a reliable passive income stream that protects your capital against inflation. In addition, many companies share a portion of their profits with investors in the form of…
Luckily, it’s far easier to begin trading than it was in the 90s when Wall Street and big money were the only options. Get started with our introduction to stock trading. You’ll come away feeling more confident about the task ahead, while acquiring a base knowledge of all the most…