10 Things You Must Know About Bull Markets
It’s easy to look smart when most stocks are gaining day after day, but how much do you really know about the workings of bull markets?
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, 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 S&P 500 confirmed it’s in a bull on Aug. 18, 2020, when it closed above its previous all-time high recorded earlier in the year, on Feb. 19.
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.
Indeed, from the March 23 bottom to Aug. 18’s record high, which confirmed the new bull market, the S&P 500 rose a remarkable 52%.
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.
Why They Call It 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.
