DEFINITION: The phrase “bull market” refers to conditions under which the stock market experiences an extended, across-the-board rise in prices. While the term is predominantly applied to the stock market, it may be extended to other traded assets, including bonds, commodities, real estate, and currencies.
Since normal market trading involves considerable fluctuation in security prices, to qualify as a “bull market” the price rise must be expected to last over many months if not years.
ETYMOLOGY: The origin of the phrase “bull market” is uncertain. The term is attested from the early eighteenth century and appears to have been invented as a complement to the phrase “bear market.” The choice of “bull” as the counterpart to “bear” may have been inspired by the twin practices of bull- and bearbaiting. Another theory points to the aggressive, hard-charging behavior of bulls.
The English noun “bull” is attested from the twelfth century. It derives, via Middle English bule, from Old English bula, which is akin to the Old English verb blāwan, meaning “to blow.”
The English noun “market” derives, via Middle English and Old North French, from the Latin noun mercātus, mercātūs, meaning “traffic,” “trade,” or “business,” as well as the place where the trade or business takes place, i.e., a “marketplace.”
Mercātus, in turn, is linked to the deponent verb mercor, mercari, meaning “to trade” or “to traffic in,” as well as the noun merx, mercis, meaning “goods” or “merchandise.”
USAGE: Bull markets are marked by optimism, investor confidence, and the anticipation of sustained profits over a considerable time span.
It is not easy to accurately foresee when market trends might shift. This difficulty is partly due to the importance of psychological factors and speculative behavior, which can significantly impact market conditions but are very hard to predict.
There is no universally recognized definition of a bull market. Nevertheless, the most prevalent characterization of a bull market often involves a scenario—symmetrical with a bear market—in which stock prices go up by 20 percent or more from their recent lows.
Popular business news outlets may indulge in the prediction of bull markets; however, given the inherent difficult of forecasting events that depend upon human agency, serious financial analysts tend to limit their discussion of bull markets to hindsight. Only after a bull market has run its course does it become clear that there was one.
Bull markets usually occur during periods of economic recovery or when economic growth is already strong. They often coincide with a reduction in the unemployment rate, a robust gross domestic product (GDP), and/or an upswing in corporate profits.
Under any or all of these conditions, it is natural for investor confidence to grow—which is the principal driver of what, in retrospect, will come to be seen as a bull market.
During a bull market, there is by definition an increase in the demand for stocks, which produces a buoyant state of mind among market participants overall. Moreover, bull markets are generally marked by an uptick in initial public offering (IPO) activity.
Bull market do have several distinctive features even while they are happening. Among these is a surge in trading volume, driven by a greater number of investors who are eager to acquire and retain securities on account of the perceived potential for capital gains.
In addition, in a bull market, the prices of securities often increase due to investors’ willingness to pay higher prices in the belief that the value of their stocks will continue to go up.
Furthermore, a bull market is frequently marked by greater market liquidity, owing to heightened demand for securities and a smaller number of sellers. This dynamic facilitates swift and cost-effective buying and selling for investors.
In a bull market scenario, companies that are doing well might choose to enhance shareholder satisfaction by increasing dividend payouts—a particularly appealing prospect for income-oriented investors.
Finally, during a bull market, there tends to be a surge in companies opting to go public and generate funds with an IPO. This avenue presents investors with the opportunity to participate in the progress of young and promising enterprises.