What is a Bull Market?

Mary McMahon
Mary McMahon

The term “bull market” is used to refer to a financial market which is climbing in value, or to a market which is projected to rise in value. For investors, bull markets tend to be positive, since the value of the stocks, bonds, currencies, or commodities being traded will rise rapidly. However, a bull market is also typically followed by a market decline, and it may be characterized by several market corrections which can be nerve wracking to endure.

Bull markets climb in value, much like a bull charging ahead.
Bull markets climb in value, much like a bull charging ahead.

A sudden economic boom is often marked with a bull market, as are economic recoveries in nations all over the world. The market is typically influenced by investor psychology, as investors become confident and optimistic about the direction that the market is taking. As investor and consumer confidence rises, the value of the market rapidly accelerates, with investor attitudes actively influencing the market trend. This is especially true in developing nations, with economies which hold a great deal of promise for investors.

Often, people are attracted to investing during a bull market, since they see the potential for big earnings. This leads to an increase in trading volume, with bull markets typically seeing much higher trading volume than during previous periods. Ultimately, this can be very dangerous, as high trading can drive a bubble effect, causing the market to collapse as stocks become overvalued. Experienced investors can usually recognize the signs that a market is experiencing a downturn, and they can take steps to minimize their losses.

The opposite of a bull market is a bear market, a market in which values rapidly fall and this fall is sustained across several markets. A bear market can trigger a serious recession or depression, if consumers become too despondent. A bear market may follow a bull market, but more commonly the market stabilizes through a series of corrections, small and temporary drops in market value which bring prices down to a more reasonable and sustainable level.

The origins of the terms “bull market” and “bear market” are unclear, with numerous people proposing theories for their roots. The concept of a bull market may be related to a charging bull, powering ahead with upraised horns. Some people compare a bear market to an attacking bear which is slashing market values with downturned claws. Whatever the origin of the terms, statues of bulls are often found around financial markets and trading centers, perhaps in the hope that the statue will inspire market trends.

Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a wiseGEEK researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

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