LLTS22 — What Is a Bull Cycle/Market? Characteristics of Cycles
This article walks readers through different market cycles and what elements of bull and bear markets make them unique.
Are you looking to understand the bull cycle or market and how it works? Or you are wondering how markets go into the bull cycle and what are the characteristics of a bull cycle. This article will explain everything about the bull market and how long it takes to end.
A bull market is a state of affairs in the financial markets where prices are increasing or are expected to rise. Bull markets can also refer to bonds, real estate, currencies, or commodities; however, these sectors are usually associated with the stock market.
“Bull markets” refer to periods of increased asset values due to regular price fluctuations during trading that increase a large portion of asset values. Several days, weeks, or even years may pass before a bull market emerges.
How Do Bull Markets Work?
Several factors support bull markets. Wage growth, capital inflows, minimal unemployment, strong consumer spending, and increasing corporate profits are all factors that lead to sustainable bull runs.
When the opposite occurs, however, markets can sustain rapid falls, dampened outlooks, and weaker demand for products or services that send markets downward. Stock markets witnessed their longest-ever bull run from 2009 to 2020, but this was a historical outlier. Discounting this recency bias is essential, as the average timeframe for a bull market is just 3.8 years.
The Main Characteristics of a Bull Cycle
1. Boosted investor confidence.
As stock prices increase, investors become more convinced that they will do so in the future and keep buying. Due to weak supply and strong demand, stock prices rise more.
2. More money is being invested in the future by businesses.
Purchases made by customers help businesses to grow and reinvest in themselves.
3. There is a decline in the unemployment rate.
Increasing employment leads to a reduction in unemployment rates as companies expand. In response to the competition for talent, companies raise salaries. As a result of believing they can obtain a job that pays more than their current position, workers are more enthusiastic about looking for a new job.
4. The process of spending money is more straightforward.
A salary increase will increase the amount of money customers have to spend. As a result, inflation can increase the cost of goods and services and the risk of unemployment.
How Long Do Market Cycles Last?
There isn’t a simple answer. The duration between two highs is commonly used to define a complete market cycle. In other words, there will be a bull market, a bear market, and then another bull market.
The precise timing of these cycles moving is impossible to predict. We know that the historical pattern shows that stock values are constantly growing.
While focusing on your investment goals, a well-planned, long-term strategy may be crucial. And you don’t have to do it all alone. Speak with an expert to help establish a plan targeted to your individual needs.
What Causes a Bull Market?
An investor is the one who initiates a bull market, as previously stated. The investors begin buying stocks (at a discount) when prices are expected to rise and are confident that the investment will generate profits (ROI). Stock prices continue to rise because investors become more optimistic.
Bull markets begin for a variety of reasons. Among the examples are a high gross domestic product (GDP) and a low unemployment rate. Market conditions that are favorable to investors increase investor confidence. Cryptocurrency bull markets are also affected by the same elements that affect ordinary markets.
Though cryptocurrencies have been around for quite some time, they are still relatively young compared to traditional stocks. The cryptocurrency market is unique because there are fewer investors overall.
Bull Market Example
The most famous bull market in the history of modern America started in the late stagflation era in 1982. The market kept going bullish until the end of dot-com in 2000. During this period, America faced one of its secular bull markets. This term refers to a bullish trend lasting more than a year.
For around 18 years afterward, Dow Jones Industrial Average (DJIA) hit its average annual return of 16.8%. While NASDAQ, where investors traded stocks from advanced technology companies, multiplied its value from 1000 in 1995 to more than 5000 in 2000.
Unfortunately, following nearly two decades of a bull market, the global market went bearish for the next nine years until 2009. During this period, many exchanges struggled to build their foundation.
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