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What is a bull market?

Key takeaways

  • A bull market is when stock prices rise over a period of time.
  • The typical bull market lasts just under 4 years, usually during a time of economic growth.

Since the 18th century, investors have used the term “bull market” to describe stock prices going up. They celebrate this symbol so much that there’s an actual bull statue near Wall Street in New York City.

Here’s what a bull market means for stocks and the economy, plus tips for taking the bull by the horns when it comes to your finances.

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What is a bull market?

A bull market is commonly defined as a period of time when major stock market indexes are generally rising, with market indexes eventually reaching new highs. (Reminder: A stock market index is a collection of stocks that are tracked over time to gauge their overall performance. Think: the S&P 500 or Dow Jones Industrial Average.)

That said, a bull market may be defined in many different ways, and experts may disagree about what exactly counts as a bull market. You may see some sources, for example, saying a bull market is a 20% increase from recent lows while others do not provide an exact threshold. All of this means it may not always be clear in the moment whether we are in a bull market.

Bull markets stand in contrast to bear markets, which represent a decrease of at least 20% from recent market highs.

What’s with all of this animal symbolism? Some think it’s a metaphor for the way bulls and bears may treat their prey: Bulls attack by bucking their horns upward, symbolizing prices going up. When bears attack, they swipe their claws downward, which could represent stock prices falling.

What causes a bull market?

Sometimes stocks go up because other economic indicators are heading in the same direction.

Take this simplified example: Gross domestic product (GDP), or the total value of a country’s goods and services, may rise when there is more demand for those goods and services. This boosts sales and profits for companies—a good thing for stock prices if those companies are publicly traded. Then, to handle more demand, companies may hire more workers, which can reduce unemployment. And as companies increase their demand for workers, workers tend to be able to get higher pay, which allows them to spend more and increase their demands for goods and services—and the cycle continues.

When the economy is growing, investors may be more confident in the future, which makes them more eager to buy stocks and other investments that tend to benefit from periods of growth. For this same reason, however, investors may be more reluctant to sell because they want to hold onto their investments and see how high prices will get, which can shrink the available supply of investments. This lack of supply compared to demand can cause prices to go up, potentially until they hit the 20% threshold for a bull market.

How often do bull markets happen and how long do they last?

Since 1877, there have been 26 bull markets. These bull markets have lasted a median of 42 months on average and seen stock market values (as shown by the S&P 500 stock index) rise by a median of 87% over their run.* In several bull markets, the S&P 500 grew by over 100%, more than doubling the values of portfolios that received the entire return.

It's important to keep in mind that bull markets don’t only happen when times are good. Bull markets may also emerge when a country is recovering from economic downturn, such as the bull market that followed the 2008 financial crisis.

What should you do with your money during a bull market?

A bull market is a good time to assess your investing goals. Here are 3 things to keep in mind.

1. Rebalance your portfolio if needed

There’s a lot of excitement during bull markets, which could tempt some investors to get more aggressive with their investing decisions. Before you act, pause to check on your investment plan and look at how your assets—like stocks, bonds, and short-term investments—are allocated. Why? Asset classes perform differently depending on the market, and tweaks might be necessary to maintain your desired asset allocation.

Rebalancing an investment portfolio is tweaking how much money you’re investing in different kinds of investments without changing the total amount in your accounts. For example, if the percentage of your portfolio that’s invested in stocks is too high for your long-term investing plan, you might consider rebalancing to shift more money into bonds. This could provide a way to smooth out ups and downs of the market.

For more help navigating a bull market, consider speaking with an investment professional.

2. Don’t try to guess the top of the market

When stocks hit a new record, you might wonder if a crash is just around the corner and it’s time to lock in your gains by selling investments. Remember, the typical bull market lasts years, and stocks can break many records during that bull’s run. If you cash out before you’ve hit your investing goal or need your money, you’ll miss out any potential future growth.

Avoid trying to guess when the bull market might end and stay the course with your investment plan, which should have been built with the market’s highs and lows in mind.

Bull markets tend to coincide with strong job markets. If you’re earning more from your job, consider putting part of the extra cash toward building your emergency fund. Ideally, you should have 3 to 6 months’ worth of living expenses saved up. Build these savings while you can so you’re ready for unexpected expenses or a downturn in the economy.

3. Think about your next career move

Since companies tend to be more profitable during bull markets, it could be a good time to ask for a raise or a promotion. It might also be an opportune time to research other job opportunities when the economy is strong versus during a bear market and down economy, when companies are more likely to cut jobs.

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* FMRCo, Bloomberg, Haver Analytics, FactSet. Data as of 4/27/2023.

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Past performance is no guarantee of future results.

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