A bull market is one in which prices are either rising or expected to rise very shortly. So, investors who are called ‘bullish‘ are those eternal optimists of the stock market; they expect markets to rise, and the economy to expand. Bear in mind that both of these terms tend to describe long-term market trends. Market volatility is quite natural over the short-term, but bullish investors, and bull markets, both describe the expectation of a long-term trend of market expension.
Bull markets, and the bullish investors which fuel the rise, tend to emerge when the economy is strong. When is an economy adjudged to be healthy? There are many answers. When unemployment rates are low. When inflation is under control. Indeed, one of the key metric for an economy’s health is actually how bullish – optimistic – most investors are in the first place! If investors are bullish, and therefore expect that the upward rise in stocks will continue, they’re more likely to buy more stocks in anticipation of making profits. If more buyers are interested in buying shares at a certain price than there are sellers willing to part with the shares at that price, then that price will of course rise, as demand exceeds supply.
A bull market’s natural opposite is a bear market. Bearish investors hold completely different viewpoint to bullish types. As you may guess, these folks have much more negative outlooks on the future prospects of a given market. Why do we have these terms? Well, understanding an investor’s predictions about the future is important, as it gives an important indication of their behaviour. It is, after all, human behaviour which drives the market in the first place! Generally, if a reliable poll were to conclude that most investors are bearish about the future, they are likely to sell what they have in anticipation of a downfall… which actually helps cause that downfall in the first place. By contrast, if optimism is the feeling du jour, people are likely to want to spend, which may preclude a period of economic growth.
Did you find this bull market definition helpful? Subscribe to our spam-free newsletter to receive regular financial definitions, updates on our latest articles, plus exclusive annotated market reports.