What is a Bull market?
A bull market is when you see the stock prices rising for a sustained period of time spanning months or years. As the bull market gains momentum, more investors hop-in to make the most of an upward rally. A bull run indicates lesser volatile markets and more stability. It is difficult to predict the market movement because market trends change due to speculation when it comes to both upwards and downward movements.
When does a bull market take place?
Ideally, there are four phases of a bull market’s life cycle, the first stage begins with its reviving from the pessimistic approach left behind by the bearish market scenario. The investor sentiment here is weak and the stock prices are low. The second phase is where the market gradually revives from low stock prices, or corporate earnings and progressively picking up trading activities where the economic indicators begin performing at above average levels. In the third phase, the markets begin to gain momentum increasingly touching new trading peaks, here security trading sees a rise and dividend yields begin to fall low, thereby indicating sufficient liquidity in the markets; and finally the fourth phase is where stock p/e ratios are at an all-time high. One begins to see high IPO activities along with trading and speculation. To further illustrate 2008-09 saw a 31 and 63 IPOs respectively, whereas, 2014 saw 275 IPOs.
Bull markets show a strengthening economy with strong GDP numbers, the companies see a rise in their profits. During a bull market, the overall demand for stocks and a general tone of the market commentary is positive and it eventually increases the investor’s confidence.A bull rally does offer plenty of opportunities to make money or multiply existing investments but such rallies do not last forever and the exact time to enter or exit cannot be predicted, even by industry experts. So, therefore, it is important you know when to buy and sell to maximise your gains.