Is a bull market good?
Generally, a bull market occurs when there is a rise of 20% or more in a broad market index over at least a two-month period.” During a bull market, investors are generally enthusiastic about a strong economy and solid job growth.
Benefits of investing during a bull market
Profit potential: Bull markets are characterized by rising asset prices, which can lead to significant gains for investors. This presents opportunities to grow wealth and achieve financial goals.
While bull markets are fueled by optimism, bear markets — which occur when stock prices fall 20% or more for a sustained period of time — are just the opposite. Bulls are generally powered by economic strength, whereas bear markets often occur in periods of economic slowdown and higher unemployment.
3. How long the average bull market lasts. As much as investors would like the answer to this question to be "forever," bull markets tend to run for just under four years. The average bull market duration, since 1932, is 3.8 years, according to market research firm InvesTech Research.
In a bull market, asset prices are generally high. Investors, especially those who are new or are experiencing FOMO (fear of missing out), might enter the market at peak prices. Buying at high prices increases the risk of significant losses if the market corrects or enters a bear phase.
A bull market describes a period of continuous growth in the stock market of at least 20% and often coincides with a strengthening economy. Bull markets are generally a more profitable and less risky time to invest, but investing during bear markets can be beneficial, too.
Time is your most valuable resource when building wealth in the stock market. So rather than waiting for the ideal time to invest, it's often better to buy now and hold your investments for the long term. Even if you invest at the "wrong" time, it can still pay off over time.
With stock indexes at all-time highs, it seems we are in the midst of a new bull market. While much of the market's recent gains have come from a handful of stocks, the rally has begun to broaden in recent months. Expectations of an earnings rebound in 2024 suggest earnings could continue to drive the market higher.
Ideally, as investors see what appears to be the start of a bull market, they might buy stocks, stock mutual funds, and ETFs. As the bull market surges higher, they might consider selling some of their equity holdings. At the very least, they should continue with their normal rebalancing regimen.
Bear markets also may accompany general economic downturns such as a recession. Bear markets are seen as the opposite of upward-trending bull markets.
When was the last time we were in a bull market?
Bull Market Period | Duration | Total S&P 500 Return |
---|---|---|
October 2002 to October 2007 | 60 months | 1.015 |
March 2009 to February 2020 | 132 months | 4.005 |
March 2020 to January 2022 | 21 month | 1.144 |
October 2022 to present | 10 months | 0.248 |
The Last Bull Run: A Recap
The most recent significant bull run occurred in 2020 and extended into the early months of 2021. Cryptocurrencies, notably Bitcoin and Ethereum, experienced a surge in price, reaching unprecedented all-time highs.
Declining unemployment rate: Bull markets are often marked by a declining or low unemployment, and as people have money to spend, they drive corporate profits higher. Growing economy: Bull markets also tend to coincide with periods when the economy is growing, including positive signs among key economic indicators.
Investors who want to benefit from a bull market should buy early in order to take advantage of rising prices and sell them when they've reached their peak. Although it is hard to determine when the bottom and peak will take place, most losses will be minimal and are usually temporary.
Even in a bull market, “if you check often you will see losses more often, which causes stress,” said Blanchett. That effect is magnified for the average person, because the pain of losing is more powerful than the pleasure of gaining, he added.
Economic downturn or recession
However, economic indicators can change, and if there are signs of an economic downturn or recession, it can trigger a reversal in market sentiment. Factors such as slowing economic growth, rising inflation, or geopolitical tensions can contribute to the end of a bull run.
It's likely that, if you invest in a bear market, you will at first sustain some losses that will test your nerve. Conversely, if you take profits as markets are rising, you will often see prices rise further after you have sold. However, with a long enough time horizon, you should expect to see positive results.
When did the bull market start? The current bull market started in October 2022, when the S&P 500 reached its most recent low. Since then, the index has swelled about 35 percent.
This month we are examining how the current bull market, which began in October 2022, compares to past bull markets (defined as at least a 30% rally off previous lows). Using the daily closing price of the lows reached in October 2022, the Dow Jones Industrial Average (DJIA) has rallied 33% in 17 months.
However, if you have noticed significantly poor performance over the last two or more years, it may be time to cut your losses and move on. To help your decision, compare the fund's performance to a suitable benchmark or to similar funds. Exceptionally poor comparative performance should be a signal to sell the fund.
When should you not invest money?
Choosing which account to open for your savings can be as important as how much you save. “I advise my clients that any money they are going to need to spend in the next two to three years should not be invested in stocks,” says Itkin. “You do not want to have to sell during a bear market and risk losing principal.”
Is now a good time to invest in stocks? If you're looking to invest for your future -- five, 10, or 40 years from now -- now is as good a time as ever to buy stocks. Despite ongoing recession fears, it's important to remember the market is forward-looking. Stock values are based on future expected earnings.
Economic growth actually accelerated above its 10-year average in 2023. That resilience, coupled with a fascination about artificial intelligence (AI), changed investors' collective mood. The S&P 500 soared throughout the year and finally reached a new high in January 2024, making the new bull market official.
As a whole, analysts are optimistic about the outlook for stock prices in 2024. The consensus analyst price target for the S&P 500 is 5,090, suggesting roughly 8.5% upside from current levels.
Meanwhile, the median streak of positive returns can extend to 17 months with a gain of 14%, based on historical data. That suggests the S&P 500 could trade to 6,000 by August 2025, and to as high as 6,150 by November 2025.
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