Have you ever wanted to participate in the running of the bulls without getting physically hurt? If the answer is yes, then it’s time to learn about the bull market.
A bull market is pretty similar to bull charging, but it isn’t just one bull, so get ready to charge!
What is a Bull Market?
The bull market doesn’t actually have anything to do with the running of the bulls, but it does have to do with the running of the investors.
A bull market is a time period in the market when asset prices have or will rise, causing a frenzy amongst investors. Generally, the increase is around 20%
During that time period, investors rush to buy, leading to prices rising more, meaning a more competitive market that is performing positively.
The origin of the name comes from a bull’s nature to thrust it’s horn up into the air during an attack, much like the investors as they buy stocks raising the prices. I like to imagine a bunch of guys in suits wearing horns charging around like the running of the bulls, but unfortunately, it’s a little more tame than that.
Bulls Like Lemonade?
Need some more explanation for this concept? Pull up a seat to figure out how this works.
Barney expanded the lemonade stand where there are no lemonade stands, Monahans, Texas. This location SHOCKINGLY doesn’t have any other competitors and has had temperatures up to 120 degrees Fahrenheit this summer.
Because of the demand for lemonade and lack of competition, a surge of customers that want lemonade nearly overwhelm the stand. Here’s how Barney adjusted;
- – Prices: Initially, lemonade was sold for $3, but the demand caused Barney to raise the prices. Lemonade is now doubled to $6.
- – Customers: The initial customers told their friends and family how delicious the lemonade was, their connections also become customers, which increases the amount of interest.
- – Larger purchases: The demand made initial customers nervous they wouldn’t get any lemonade, so they decided to buy larger quantities of lemonade, like gallons, to fulfill their summer needs.
- – Customer Loyalty: The lemonade stand keeps the customers returning for great services and getting great lemonade in return.
This is just a glimpse into the frenzy that can happen during a bull market, but imagine those guys with their suits and horns all jumping onto a stock, telling their friends, trading in high volumes, and maintaining loyalty because of the positive returns. Hmm, maybe I do want to try the running of the bulls.
Real Life Example
If you’re unaware, America was living the dream with the largest bull run in history spanning from 2009 to 2020. Just from those dates, you can picture how after the crash in 2008, the market went up, and then the pandemic kicked us back to reality in 2020.
There are a few reasons this bull market lasted as long as it did. Here are a few factors:
- Dovish monetary policy from the Federal Agency
- International trade
- President Trump’s Tax Cuts and Jobs Act
- Advancement in Technology
- Market Accessibility
If you’re thinking, “Wow, I thought the United States has been in an economic crisis for a long time.” Then remember, the media profits off your anxieties and ignorance, and these factors that were prevalent during that period tell a different story.
- Rising Asset Prices
- Investor Confidence
- Gross Domestic Product
- Positive Corporate Performance
- Low unemployment
The crazy part about the US bull market was that several contextual things occurred when it ended, such as a trade war, political unrest, Brexit, the European debt crisis, oil-production wars, etc. But what really snapped us back? Covid-19.
So remember, you can predict certain elements, and you can be anxious about certain events. Still, occasionally something comes out of left field that nobody expects that can ruin a bull market or maybe even start one.
Bull Market Application and Action
Currently, we’re in a bull market (sigh of relief). What does that mean for how you move forward with your investments?
First and foremost, you will hear about what you should invest in, but should you actually invest in it? Equities Lab is a firm believer in backtesting your results and aiming for a quantitative investment analysis. Don’t invest in the trendy. Invest in the successful.
At the very least, creating screeners and learning how to evaluate the market through your means is the best approach to becoming the best investor during a bull market. Keep up with our content to keep learning that you can capitalize on the events surrounding you.