Bull Market Definition
The bull market is usually referred to as the stock market when the prices of the investments rise over an extended period of time. In such times when there is a bullish market, often the investors have the faith that uptrend in the prices will continue over the long term period. Additionally, in such a scenario, the economy of the country having the bullish market trend will be strong and the employment levels during those times will also be high.
The term commonly is used for describing the securities, like stocks, commodities, and bonds but bull markets situation can occur in case of other investments as well, such as in case of housing. In the situation where the market is bullish, there is strong demand of securities with the weak supply i.e., there are many investors who wish to the buy securities in the market and there are few investors who are willing for selling the securities in the market and as a result prices of the shares will rise as the investors will compete for getting the available equity in the market.
Example of the Bull Market
From the year 2009, the American market saw the start of the bull market after the end of the bearish market in the year 2008. This is the example of the bull market in America. The Dow Jones Industrial Average’s closing average price in the year 2009 was 8,885.65 which every year increased for the ten years and in 2019 the average closing price of the index became 25,793.50. As of July 23, 2019, Current price of Dow Jones Industrial Average is 27,349.19.
This shows that the American market remained bull from 2009 till 2019.
Advantages of the Bull Market
There are several different advantages of the Bull Market providing the opportunity for the investors and the other parties who are investing in the market. Some of the advantages of the bull market which exists are as follows:
- As the market trends towards the increase in the prices and growth, the risk of investment by the investor during this period is lower when compared with any other period.
- During the bull market conditions, there is a higher chance that the things will take the positive turn providing the benefit to the investors.
Disadvantages of the Bull Market
The limitations or the drawbacks of the bull market include the following:
- It is not possible for anyone to predict the market with full certainty. So no one can accurately predict that how long bull market in the economy of any country will last, due to this there lies danger that market will go in the reverse direction anytime causing loss to the investors.
- When the situation of optimism is prevailing in the market i.e., during the bull market, with the optimism comes the high prices of the securities. So this is not a great time for the investors to enter the market when they are looking for buying the inexpensive stocks.
- Achieving the perfect timing in the market i.e., buying the securities at their lowest level and selling the same at their highest selling value is almost not possible to achieve by any person. When there is a bull market, then the ideal thing for the investor is to take the advantage of the rising prices in the market by the way of buying the stocks early in the trend wherever possible, and then sells the same when the stocks have reached to their peak level.
- Bull markets and the bear market have some correlation in the economic cycle of any country. During the period of expansion in the economy, the confidence of the investors are generally high and due to this their level of spending or the investments in the market will also be high. This will further increase the prices of the stocks in the market. As economy peaks, the bull market trend may reach its highest point as well before it starts the downward trend. These conditions may begin shifting towards the bear market before the period of the economic contraction or the recession.
- Although some of the investors have an approach to invest during the bearish conditions of the market, however, the majority of investors have approached to invest during the bullish conditions of the market. As a whole when the past history is analyzed, the stock market has always posted the return.
Bull Market and bear markets have a large influence on the investments of the investors, so the investors before deciding to invest in any area should take some time for making the analyses that what market is doing and in which direction it is moving.
- As a whole when the past history is analyzed, over the long term stock market, has always posted the positive return. Achieving the perfect timing in the market is almost not possible to achieve by any person. When there is a bull market, then the ideal thing for the investor is to take the advantage of the rising prices in the market by the way of buying the stocks early in the trend wherever possible, and then sells the same when the stocks have reached to their peak level.
- The term commonly is used for describing the securities, like stocks, commodities, and bonds but bull markets situation can occur in case of other investments as well, such as in case of housing.
- Unlike the bear market where the pessimism exists, the bull market has the optimism characters which mean that investors in the market are highly confident that the market will keep giving strong results.
This has been a guide to What is Bull Market and its definition. Here we discuss the examples of the bull market in detail along with its advantages and disadvantages. You can learn more about financing from the following articles –