With stock values soaring for the first time in a long time, the United States is most definitely witnessing a “bull market” — that is, a period of visibly rapid jumps in stock value across the board. The so-called “Great Recession” is now decidedly behind us.
In fact, since 2009, the S&P’s 500 stock index has about quadrupled in value. That’s good enough to make the current bull market we’re in the second-longest on record.
Bull markets are typically considered good things, as they encourage buying and trading on the stock market. Conversely, bear markets are the opposite, characterized by a decline in stock prices. Yet, you might be surprised to learn that via a recent survey conducted by Investopedia, more than half of the 2,260 respondents didn’t know what “bull market” meant.
Noting this, we decided it would be fitting to take a closer look at what exactly a bull market is, how long it’s expected to last and how people should be investing differently because of it.
Bull Market Defined
We already noted how bull markets are defined by increasing stock value. Specifically, these markets are characterized as periods where stocks have increased by at least 20 percent.
Unfortunately for investors, it’s not possible to predict exactly when bull markets will occur. That’s largely because each bull market is different from the other, so while you can look at the data for how long a bull market lasted or how much growth there was during one, they’re tough to call.
Some of the factors that have led to bull markets in the past have included war, technological advancements and the housing market.
How Long Will it Last?
So, we’ve already established that we’re in a bull market. Naturally, the first inquiry that someone might have is in regard to when it will end. Piggybacking off the above section in terms of bull market unpredictability, a good answer is usually “nobody knows.”
What we do know about bull markets is that they typically last between five and nine years. This current one has gone on for eight, so if you play the averages, it should end relatively soon. However, noting this, the longest bull market has lasted about 14 years. Others only last two to three years before the market evens out.
Some financial experts such as Jeff Saut say this bull market has the momentum to power ahead for up to another decade.
How Should You Be Investing?
In some bull markets of the past, mass euphoria set in. During the bull market of 1999, which was triggered by a technological boom, people were literally quitting their jobs to trade stock. Investors are understandably a bit more reserved these days, but generally speaking a bull market is something that should be embraced – even if the embrace is with cautious optimism. However, your investment behavior largely depends on who you ask.
Some experts caution investors on the unpredictability of bull markets, advising consumers not to deviate from any long-term investment plans or goals. One major argument for sticking to the long-term plan is in terms of your investing tenure.
Some experts, for instance, state that if you invest over the course of 50 to 60 years, you’re going to experience multiple bull markets in your lifetime, so it doesn’t make sense to switch things up too much or try to predict when the next bull market will begin or end.
Then, there’s the aspect of bull market longevity. Being that this is the second-longest bull market on record, some are preparing for the market to correct itself.
Others, however, are encouraging investors to be more aggressive, citing reasons such as even overall growth across the board, little inflation and the overall surge. Contrary to advisors to warning against getting aggressive in bull markets, someone new to investing might look at the market as an opportunity or a fresh start to a long-term investing plan.
Regards,
Ethan Warrick
Editor
Wealth Authority
