What Is a Bull Market, and How Can Investors Benefit From One?
The S&P 500 closed up more than 20% from its October lows on Thursday, marking the start of a new bull market. In my view, the main reason to buy these two ETFs right now is their valuations. I’ve already mentioned how attractive the valuation is of the iShares Morningstar Small-Cap Value ETF. The SPDR Portfolio S&P 600 Small https://bigbostrade.com/ Cap ETF looks great, too, with a forward-earnings multiple of around 13.7 times. Rowe Price recently wrote to investors that “U.S. small-cap valuations are at historically low levels.” Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more – straight to your e-mail.
The longest bull stock market in American history was from 2009 and 2020. Between the Great Recession and the COVID pandemic, the S&P 500 rose 334% for a 30% annualized return. Some bull markets are shorter and range from three to five years, but the average length is 5.9 years.
Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. At Bankrate we strive to help you make smarter financial decisions.
- Many experts add the qualification that the index must also achieve new historic highs.
- Since then, the market began improving and financial experts predicted that we were no longer in a bear market as of early 2023.
- Other market participants will say that you can’t truly confirm a bull market until you exceed the previous all-time highs.
- Prices go up over an extended period in a bull market, while prices go down in a bear market.
- Bitcoin’s price skyrocketed from around $1,000 in January to nearly $20,000 in December.
Four strategies to consider are staying disciplined with your investing approach, keeping a long-term focus, rebalancing regularly and, if needed, retaining a financial advisor. It’s human nature to relax your investing approach when stocks keep rising. Worse, a true bull market can reward you for taking on more risk—at first. The problem shows up when the bull market ends, which always happens eventually.
Remember that over the long term, the stock market has always posted a positive return. In addition, investors may benefit from taking a short position in a bear market and profiting from falling prices. There are several ways to achieve this including short selling, buying inverse exchange-traded funds (ETFs), or buying put options. For starters, they generally happen during periods when the economy is strong or strengthening.
Investors buying overvalued assets during a bull market may be exposed to potential losses when prices return to more reasonable levels. It’s also worth noting that a bull market doesn’t necessarily mean that prices won’t slip or fluctuate. This is why it’s more sensible to consider bull markets on longer time frames.
Trading volume
After the October 2022 low point, the stock market was able to recover some of its losses in the fourth quarter. Economists had feared a severe recession was unavoidable after the Fed raised interest rates by more than five percentage points in less than 18 months. However, the labor market has remained resilient up to this point, and inflation has been trending steadily lower for the past year. Americans were frequently allowed to secure mortgages with no money down and extremely low “teaser” rates that jumped higher after a year or two. A surging real estate market encouraged many Americans to refinance their mortgages and spend the extra cash. The bull market that began in March 2000 was driven by a boom in the U.S. housing market.
Stocks could surge another 10% and the bull market doesn’t depend on Fed rate cuts, Wharton professor Jeremy Siegel says
So why is a bull market considered a positive sign and a bear market a bad omen for investors? Maybe it’s because bulls are known to charge wildly to get where they want. Bears can charge, too, but they tend to destroy things, eating, rummaging and generally causing more damage than bulls.
Small-cap stocks and value stocks may outperform
A notable bull market in recent history was the period between 2003 and 2007. During this time, the S&P 500 increased by a significant margin after a previous decline; as the 2008 financial crisis took effect, major declines occurred again after the bull market run. Bull markets can be hard to predict, bollinger bands strategy but they are a natural part of the economic cycle. The economy will first expand, peak, contract and, finally, reach the trough, which is when the economy bottoms out. The market usually becomes bullish at the start of the economic cycle when the economy is growing, and investor confidence is high.
At 248 trading days, the recent run back to a bull market was the longest bear run for the S&P since 1948. One thing to note about the iShares Morningstar Small-Cap Value ETF, however, is that it’s smaller and less widely followed than many ETFs. The fund has around $404 million in assets under management, which is relatively low. Its 30-day average trading volume of close to 16,000 is also much lower than more well-known ETFs. The iShares Morningstar Small-Cap Value ETF also owns small-cap U.S. stocks — 1,123 of them as of Jan. 26, 2024. This ETF, though, focuses on small-cap stocks that have attractive valuations.
Pandemic lockdowns brought the U.S. economy to a screeching halt, and the government was forced to issue trillions of dollars of economic stimulus to get the country through the crisis. When subprime borrowers began defaulting en masse, investment banks holding subprime mortgage debt suffered massive losses, triggering the Great Recession that ended the bull market. The bull market that began in September 2001 is often forgotten because it was the shortest-lived bull market and generated the lowest S&P 500 return of any bull market in history. Inflation surged above 10% in the late 1970s, eventually peaking at more than 14% in 1980. Fed Chair Paul Volcker was forced to raise the federal funds rate to a peak of 19.3% in 1980, conditions the bull market simply couldn’t survive. Here’s a brief look back at the history of bull markets since 1957.
A bull market tends to occur when there’s a price increase on securities of more than 20% after a period of decline. During bull markets, there’s also more trading activity since more investors are willing to buy and hold securities in order to receive capital gains. 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.
Our editorial team does not receive direct compensation from our advertisers. The offers that appear on this site are from companies that compensate us. But this compensation does not influence the information we publish, or the reviews that you see on this site.
How long the average bull market lasts
The record-setting bull market of the roaring 1990s lasted more than a decade and remains one of the most impressive periods of prolonged stock market gains in history. The booming U.S. economy of the 1990s was fueled by the end of the Cold War and the dawn of the Internet Age. The bull market that began in August 1982 represents a period of economic prosperity in the U.S. that political conservatives characterize as the era of Reaganomics. Once Volcker reigned in inflation, aggressive interest rate cuts and President Ronald Reagan’s tax cuts triggered a major stock market rally.
