10 Things You Must Know About Bull Markets (2024)

10 Things You Must Know About Bull Markets (1)

(Image credit: Getty Images)

10 Things You Must Know About Bull Markets (2)

By Anne Kates Smith, Dan Burrows

last updated

There’s a saying on Wall Street: Don’t confuse brains with a bull market.

After all, when most stocks are gaining day after day, it’s easy to look smart. Indeed, the market has been in bull mode for so much of the last decade-plus, that it's hard to remember what challenging investing looks like.

Technical analysts differ on the definition of a bull market, but by one measure the confirmed it was in a bull on January 19, 2024, when it closed above its previous record close set back on January 3, 2022.

For the record, the S&P 500's longest bull market in history began in March 2009 and ended abruptly in March 2020, clobbered by coronavirus fears. The ensuing bear market cut fast and deep, but bottomed out in late March. About a month after its nadir, the market returned to bull-market territory and just kept chugging along.

Justified or not, those of us who have stuck around in stocks are probably feeling pretty brainy these days. Still, there’s plenty more to know about extended runs in stocks.

Read on to learn 10 things you must know about bull markets.

10 Things You Must Know About Bull Markets (3)

To continue reading this article
please register for free

This is different from signing in to your print subscription


Why am I seeing this? Find out more here

10 Things You Must Know About Bull Markets (4)

(Image credit: Ycharts)

1. Why is it called a bull market?

There are several theories. Some say it's because the New York Stock Exchange is built on land that was used by the Dutch in the 17th century to auction off cattle. Another popular explanation is that rising markets were once fueled by fast-talking brokers with exaggerated claims about stocks (thus the phrase, "a line of bull").

As much as the "line of bull" story rings true, the most widely accepted theory is that the actions of bulls and bears, when attacking an opponent, reflect market movements. Bulls thrust upward, while bears swipe downward.

Sponsored Content10 Things You Must Know About Bull Markets (5)

10 Things You Must Know About Bull Markets (6)

(Image credit: Getty Images)

2. When stocks are officially in a bull market

There are many misconceptions about bull markets. No, we're not in a bull market just because the pundits on TV say we are. Neither is it a bull market when a major stock market index — such as the Dow Jones Industrial Average, S&P 500 or Nasdaq Composite — hits a new record high.

Rather, market trackers at S&P Dow Jones Indices define a bull market as a 20% rise in the S&P 500 from its previous low. By that measure — a 20% gain off the low —the current bull market began on January 19, 2024.

Note that by that measure, a bull market comes to an end when the S&P 500 falls 20% from its peak.

But other market analysis and research houses view bull markets differently. For instance, Sam Stovall, chief investment strategist at investment research firm CFRA, told Kiplinger's Personal Finance that he defines a bull market as a gain of at least 20% too – but the market also must go six months without falling beneath the previous low.

Other market participants will say that you can't truly confirm a bull market until you exceed the previous all-time highs. By that measure, the bull market started on March 23, 2020, but wasn't confirmed until Aug. 18, 2020, when the S&P 500 eclipsed its previous high set on Feb. 19, 2020.

Regardless, by most strategists' definitions, we're in a new bull market.

Sponsored Content10 Things You Must Know About Bull Markets (7)

10 Things You Must Know About Bull Markets (8)

(Image credit: Getty Images)

3. How long the average bull market lasts

As much as investors would like the answer to this question to be "forever," bull markets tend to run for just under four years.

The average bull market duration, since 1932, is 3.8 years, according to market research firm InvesTech Research. As noted above, the longest bull market in history ran for 11 years, from 2009 to 2020.

Sponsored Content10 Things You Must Know About Bull Markets (9)

10 Things You Must Know About Bull Markets (10)

(Image credit: Ycharts)

4. How common bull markets are

Not including our current uptrend (because some strategists want further confirmation), there have been 26 bull markets since 1928, according to Ned Davis Research, which uses its own set of signals to determine bull and bear markets. We have seen the same number of bear markets over that time frame.

On average, stocks gain 112% during a bull market. That's against an average loss of 36% during a bear market. And, of course, stocks have only gone up over the long term.

Sponsored Content10 Things You Must Know About Bull Markets (11)

10 Things You Must Know About Bull Markets (12)

(Image credit: Getty Images)

5. The types of stocks that do best in a bull market

It depends.

Typically, over the course of a bull market, different types of stocks will lead the pack. In a young bull market (early in an economic expansion), the cyclical sectors that are most sensitive to interest rates and economic growth do best, including financials, consumer discretionary (companies that provide nonessential goods or services) and industrials.

Later, tech stocks tend to lead mid-cycle, and commodity-linked sectors, including energy and materials, often outperform at the end stages of the economic cycle.

But this isn't your typical bull market. As we'll see below, tech stocks are outperforming and financials are lagging. Remember that a diversified portfolio will probably own all or most of these stocks, but the proportions will likely change over time.

Sponsored Content10 Things You Must Know About Bull Markets (13)

10 Things You Must Know About Bull Markets (14)

(Image credit: Getty Images)

6. Best-performing sector in the current bull market

There's really no agreement on when a bull market "officially" begins. Some say it's when the market rises 20% off the bear-market bottom, while others contend it's not a bull until the market regains its prior peak.

But ever since the market took off in 2023, it's been led by the Magnificent 7 stocks. The group is made up of mega-cap stocks Apple (AAPL), Alphabet (GOOGL), Microsoft (MSFT), Amazon.com (AMZN), Meta Platforms (META), Tesla (TSLA) and Nvidia (NVDA).

In 2023, the Magnificent 7 stocks logged an impressive average return of 111%, compared to a 24% return for the broader S&P 500.

Sponsored Content10 Things You Must Know About Bull Markets (15)

10 Things You Must Know About Bull Markets (16)

(Image credit: Getty Images)

7. Stocks leading the rally

For the 52 weeks ended January 19, the best performing stocks in the S&P 500 included Nvidia, Meta Platforms and Royal Caribbean (RCL).

Sponsored Content10 Things You Must Know About Bull Markets (17)

10 Things You Must Know About Bull Markets (18)

(Image credit: Getty Images)

8. Bull markets can fuel unstainable businesses

All the great bubbles started out as bull markets. From the Dutch tulip bulb mania of 1636-37 to the Nifty Fifty blue-chip stocks that collapsed in 1973 to the dot-com darlings that popped the turn-of-the-century tech bubble, spectacular rises and breathtaking falls prove that irrational euphoria and a herd mentality can catapult any market into oblivion.

To learn about the occasionally catastrophic combination of human nature and financial markets, read Manias, Panics and Crashes: A History of Financial Crises, by Charles P. Kindleberger. The newest edition of the classic book was updated by economist Robert Z. Aliber and released in 2015.

Sponsored Content10 Things You Must Know About Bull Markets (19)

10 Things You Must Know About Bull Markets (20)

(Image credit: Getty Images)

9. What a secular bull market is

A secular bull market is an advance usually measured by the decade instead of by the year, occasionally punctuated by shorter bear markets.

Secular bull markets include the run from 1982 through 2000 that saw prices for stocks in the S&P 500 rise more than 1,200%, despite bear markets in 1987 and 1990. The 1949-1966 secular bull withstood a nearly 30% drop in 1962. The average gain for secular bulls approaches 500%.

Sponsored Content10 Things You Must Know About Bull Markets (21)

10 Things You Must Know About Bull Markets (22)

(Image credit: Getty Images)

10. What kills a bull market

A rising inflation, higher interest rates and recession can all contribute to the death of a bull market. But timing is everything.

The stock market anticipates a recession, typically peaking six to nine months in advance of the onset of one. Making things even trickier, stocks sometimes anticipate recessions that never materialize. Also, stocks tend to perform well in the early days of higher rates and rising inflation; they signal a strengthening economy, after all.

Eventually, however, higher rates choke off growth as inflation erodes the value of investment returns.

Related Content

  • Best Dividend Stocks for Dependable Dividend Growth
  • World's Most Valuable Company: Apple and Microsoft Battle for Top Spot

Sponsored Content10 Things You Must Know About Bull Markets (23)

10 Things You Must Know About Bull Markets (24)

Anne Kates Smith

Executive Editor, Kiplinger's Personal Finance

Anne Kates Smith brings Wall Street to Main Street, with decades of experience covering investments and personal finance for real people trying to navigate fast-changing markets, preserve financial security or plan for the future. She oversees the magazine's investing coverage, authors Kiplinger’s biannual stock-market outlooks and writes the "Your Mind and Your Money" column, a take on behavioral finance and how investors can get out of their own way. Smith began her journalism career as a writer and columnist for USA Today. Prior to joining Kiplinger, she was a senior editor at U.S. News & World Report and a contributing columnist for TheStreet. Smith is a graduate of St. John's College in Annapolis, Md., the third-oldest college in America.

Latest

SPONSORED_HEADLINE

SPONSOREDSPONSORED_STRAPLINE

SPONSORED_BYLINE

10 Things You Must Know About Bull Markets (2024)

FAQs

10 Things You Must Know About Bull Markets? ›

Bull markets generally take place when the economy is strengthening or when it is already strong. They tend to happen in line with strong gross domestic product (GDP) and a drop in unemployment and will often coincide with a rise in corporate profits.

What is true about a bull market? ›

Bull markets generally take place when the economy is strengthening or when it is already strong. They tend to happen in line with strong gross domestic product (GDP) and a drop in unemployment and will often coincide with a rise in corporate profits.

What are bull market rules? ›

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.

What is typically happening in a bull market? ›

Key Points. A bull market is defined by a sustained rise in stock prices over an extended period of time. Investors are optimistic about economic growth and profitability of companies. Typically characterized by increasing investor confidence and high trading volume. Motley Fool Issues Rare “All In” Buy Alert.

What are the risks of a bull market? ›

In a bull market, asset prices are generally high. Investors, especially those who are new or are experiencing FOMO (fear of missing out), might enter the market at peak prices. Buying at high prices increases the risk of significant losses if the market corrects or enters a bear phase.

Is the bull market good or bad? ›

Generally, a bull market occurs when there is a rise of 20% or more in a broad market index over at least a two-month period.” During a bull market, investors are generally enthusiastic about a strong economy and solid job growth.

Why is bull market important? ›

Bull markets typically occur with a growing economy, as rising corporate profits translate into rising stock prices. Higher profits and the expectation of still-higher profits can fuel investors' expectations, causing them to bid up asset prices as long as the future looks bright.

What is the bull market trick? ›

A popular strategy in bull market trading is buying a call option, which is a contract with a due date that gives you the right to buy a certain asset at a specified price. You may end up deciding not to buy at all as there's no obligation to do so, but you'd lose the premium you committed to buy the call option.

What not to do in a bull market? ›

Mistake 4: Delaying or not making an investment

Last on the list but most common - when the market is at an all-time high in a bull market, most investors stop their SIP or don't make fresh investments. However, this mindset is because you may assume that the market will fall. However, it may not happen.

How long do bull markets typically last? ›

3. How long the average bull market lasts. As much as investors would like the answer to this question to be "forever," bull markets tend to run for just under four years. The average bull market duration, since 1932, is 3.8 years, according to market research firm InvesTech Research.

Who benefits from the bull market? ›

Investors typically make money by investing in stock early in a bull market. Prices will continue to rise for several months or years, depending on economic conditions. Investors can then sell their stock when the economy reaches its peak to make a profit.

What happens when bull market ends? ›

A bull market ends when stocks fall 20 percent below their last high — a period known as a bear market. The last time the S&P 500 entered a bear market was in 2022, as investors recoiled in the face of stubborn inflation and rising interest rates.

Are we in a bull market in 2024? ›

With stock indexes at all-time highs, it seems we are in the midst of a new bull market. While much of the market's recent gains have come from a handful of stocks, the rally has begun to broaden in recent months. Expectations of an earnings rebound in 2024 suggest earnings could continue to drive the market higher.

Can a bull be trusted? ›

It is essential that all farmers and farm workers treat bulls with the utmost respect if they are to avoid being attacked. Never trust any bull irrespective of age or breed.

Do you make money in a bull market? ›

Even better, bull markets tend to last longer than bear markets—which means the gains keep coming. Bull markets typically stretch out for two to five years, delivering an average S&P 500 gain of nearly 178%.

Are we in a bull market now? ›

This month we are examining how the current bull market, which began in October 2022, compares to past bull markets (defined as at least a 30% rally off previous lows). Using the daily closing price of the lows reached in October 2022, the Dow Jones Industrial Average (DJIA) has rallied 33% in 17 months.

What is a bull market quizlet? ›

Bull Market. A period of increased stock trading and rising stock prices.

Which describes a bull market quizlet? ›

Which describes a bull market? when there is a rise or expected rise in stock prices.

What are the characteristics of a bull? ›

Bulls are much more muscular than cows, with thicker bones, larger feet, a very muscular neck, and a large, bony head with protective ridges over the eyes. These features assist bulls in fighting for domination over a herd, giving the winner superior access to cows for reproduction.

Do prices rise in a bull market? ›

A bull market is a period of upward-trending prices. A new bull begins once prices rise at least 20% off the most recent market bottom.

Top Articles
Latest Posts
Article information

Author: Fredrick Kertzmann

Last Updated:

Views: 5677

Rating: 4.6 / 5 (66 voted)

Reviews: 81% of readers found this page helpful

Author information

Name: Fredrick Kertzmann

Birthday: 2000-04-29

Address: Apt. 203 613 Huels Gateway, Ralphtown, LA 40204

Phone: +2135150832870

Job: Regional Design Producer

Hobby: Nordic skating, Lacemaking, Mountain biking, Rowing, Gardening, Water sports, role-playing games

Introduction: My name is Fredrick Kertzmann, I am a gleaming, encouraging, inexpensive, thankful, tender, quaint, precious person who loves writing and wants to share my knowledge and understanding with you.