Bull market
Family VII · Market & styles
Not to be confused with bull trap.
Bull market describes a sustained period in which asset prices rise broadly across a market or asset class, generally defined as a gain of 20% or more from recent lows. The term is applied to equities, bonds, commodities, currencies and entire indices, and it reflects the direction and persistence of price movement rather than a single day's gain. Bull markets are characterised by rising prices, positive sentiment and expectations of continued economic expansion.
Definition and thresholds
The most widely cited threshold for a bull market is a rise of at least 20% from a recent low, though this figure is a convention rather than a rule. Some analysts require the gain to persist for a minimum period, such as two months, to distinguish a genuine trend from a sharp rebound. The threshold and duration criteria vary by market, index and commentator.
A bull market is the opposite of a bear market, which is typically defined as a decline of 20% or more from recent highs. The two terms describe the prevailing direction of a market over months or years, not intraday fluctuations.
Worked example
In this example, the index must rise from 1,000 to at least 1,200 for the 20% threshold to be met. A close below 1,200 would not satisfy the conventional definition, although some analysts might still describe a strong upward trend as bullish.
Characteristics and caveats
Bull markets are often accompanied by rising corporate earnings, low unemployment, accommodative monetary policy and strong investor confidence. However, the presence of these conditions is not required, and markets can rise during periods of weak economic data.
The 20% threshold is a heuristic, not a universal rule. Different asset classes, indices and timeframes may use different criteria. A bull market in one sector or country can coexist with a bear market in another.
Often confused with
- bull trap
- A bull trap is a price pattern in which an asset breaks above a resistance level, attracting buyers, and then reverses sharply back below that level, leaving those buyers with losses.