Generally, a bull market is a period of sustained rising prices. A bull market most often refers to positive movements in the stock market, although it can also be used to describe rises in other tradeable securities, such as bonds, commodities and currencies.

Bull vs. Bear

A bull market is the opposite of a bear market, in which prices decline by 20 percent or more over a period of two months or longer. Historically, bull markets occur more frequently than bear markets, with longer durations. Between 1926 and June 2017 the average bull market period lasted nine years, with an average cumulative total return of 470 percent.

Aside from an uptick in pricing, bull markets are frequently characterized by high levels of investor optimism. There’s a strong expectation that the trend in rising prices will continue, although it’s difficult to predict at what point a bull market may begin to transition into a bear market.

Trading and the Economic Cycle

Trading activity is often higher during a bull market period, as more investors seek to take advantage of the incline in pricing. There is the potential, however, for stock prices to become overvalued, which may trigger speculation that a market correction is imminent. A correction is essentially a resetting of the market, in which stock prices fall by 10 percent or more over a short span of time.

Bull markets—and their bear market counterparts—have some correlation to the economic cycle. When the economy is in a period of expansion and consumer confidence is high, that’s likely to fuel higher levels of spending. This can send stock prices moving up. As the economy peaks, the bull market may also reach its highest point before beginning to wind down. Conditions may begin to shift toward a bear market ahead of a period of economic contraction or recession.

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