bull market
In financial markets, a bull market is a period during which prices are rising consistently. The term refers most often to the stock market, although it can also apply to other securities and commodities. A “bull” is an investor who’s optimistic, confident, and expects that the good times will keep rolling.
Bull market vs bear market
There’s no official rule as to what defines a bull market, but in general, market analysts and pundits define it as a gain of 20% or more from a recent low in a major financial benchmark such as the S&P 500. Its counterpart, a bear market, is one in which prices have fallen 20% from a recent high. Learn more about bull and bear markets.
Common signs of a bull market
A bullish stock market usually occurs during the growth phase of the economic cycle.
- Companies are turning profits and corporate earnings metrics such as the price-to-equity (P/E) ratio are rising.
- Consumers are spending, especially on big-ticket items such as houses and automobiles.
- Job growth is steady, with company payrolls expanding and the unemployment rate falling.
- Active traders (e.g., those who use technical analysis to spot market trends) are buying on positive momentum, with many buying on margin (i.e., with borrowed money).
These phenomena create a feedback loop: Good news fuels investor enthusiasm, which drives more buying and higher prices.
Bull markets can last for months or even years. The U.S. experienced its longest bull market from 2009 (after the financial crisis of 2007–08) to early 2020 (when the bull market was interrupted by the COVID-19 pandemic). It was driven by a post-recession recovery, low interest rates, and expanding tech companies.
What ends a bull market?
There’s an old Wall Street adage that “bull markets don’t die of old age; they die of fright.” Although that’s not universally true, there are a few things that have historically spelled the end of a bull cycle:
- Higher interest rates, perhaps triggered by a spike in inflation
- An economic slowdown, which can trigger layoffs, business closures, and decreased consumer spending
- A global shock or unexpected event, such as a war, pandemic, or the popping of an economic bubble
Not coincidentally, these are among the fundamental causes of a bear market.
Bull market strategies
When the market is trending upward, investors often look for ways to make the most of the momentum. Here are a few common strategies in bull markets:
- Buy and hold. Sometimes the simplest strategy wins. In a long bull market, holding a portfolio of index funds or other broad-based investments and letting compounding do its work can be just as effective as trading more complex strategies.
- Buy the dip. In a strong bull market, short-term pullbacks can be an opportunity—not a red flag. Some investors use these temporary drops to add to their positions, expecting prices to bounce back. This strategy relies on the idea that the overall trend is still upward, even if the market takes a breather.
- Buy call options. A call option gives the buyer the right, but not the obligation, to buy the underlying stock at a set price by a set date. A long call option allows you to participate in a bull market move, but limits your downside exposure should the bull turn to bear.
- Sell cash-secured puts. Some options traders sell a put option on a strike price at which they would be willing to buy shares of the underlying stock. If the stock stays above the strike price, they keep the premium. If it dips, they buy the stock at a lower price—and in a bull market, that might work in their favor.
- Sell vertical put spreads. For options traders who are moderately bullish, a vertical put spread (buying one put while selling another at a lower strike price) can offer limited risk and defined profit potential. This strategy is less aggressive than buying shares outright, but still takes advantage of upward trends.
- Stay invested. Sitting on the sidelines during a bull run can mean missing out on gains. While timing the market is difficult, staying invested—especially with a diversified portfolio—can help you ride out small bumps and capture long-term growth.Trading vs. InvestingEncyclopædia Britannica, Inc.
The bottom line
Although bull markets offer opportunities for portfolio growth, they’re not risk free. Overconfidence can lead to overvalued stocks or even asset bubbles. Eventually, every bull market runs its course and ushers in a new bear cycle—sometimes slowly, sometimes sharply. For investors, understanding the signs of a bull market can help balance excitement with prudent risk management.