What is Bull market?

A bull market is a long period when prices in a market, such as shares, keep rising and investors are broadly optimistic. The most common rule of thumb says a bull market begins when a market index has risen 20% or more from its most recent low. An index is a measure that tracks the combined value of a group of shares, such as the S&P 500. The name is usually linked to the way a bull attacks, thrusting its horns upwards. The opposite is a bear market, a fall of 20% or more from a recent high.

Say an index stands at 4,000 points after a long decline, and you invest $10,000 in a fund that tracks it. Over the next year the index climbs to 4,800. The gain is 4,800 minus 4,000, which is 800 points, and 800 divided by 4,000 is 0.20, or 20%. By the usual definition a new bull market has begun, and the $10,000 is now worth about $12,000 before fees and dividends. If the index then dips to 4,500, that is a fall of 300 points, and 300 divided by 4,800 is 6.25%. This is a pullback within the bull market, not the end of it.

The 20% threshold is a convention, not a law of nature, and a bull market can only be dated with hindsight. On the day a low is reached, nobody knows it is the low. Bull markets also contain declines along the way, and a fall of 10% to 20% is usually called a correction. A common misunderstanding is that a long bull market is "due" to end. Its age alone says little about what comes next. Gains can also be lost later, and the arithmetic is unforgiving: a 50% loss needs a 100% gain to recover.

For a private investor building a long-term portfolio, bull markets are where most of the growth happens. In the S&P 500, 25 of the 32 calendar years 1994–2025 were positive, and the index returned 10.7% a year with dividends reinvested since January 1993, even after a fall of 54.6% in 2007–2009. Investors who sit out rising markets miss much of that return. Long rallies also tempt investors to take on more risk near high prices. This is why many investors keep a fixed allocation, the split of money between asset types such as shares and bonds, and rebalance back to it. Rebalancing means trimming what has grown and adding to what has lagged.

By Dr. Harry Hamann

What is a bull market in plain words?
It is a long period of rising prices and investor optimism. A common definition is a rise of 20% or more from a recent low in a market index such as the S&P 500.

How long does a bull market last?
There is no fixed length. Bull markets have ranged from short rebounds to rallies lasting many years, and their start and end can only be dated with hindsight.

What is the difference between a bull and a bear market?
A bull market is a sustained rise, often 20% or more from a low. A bear market is a sustained fall of 20% or more from a high, usually with widespread pessimism.

Is a bull market a good time to invest?
Nobody knows in advance how long a rise lasts. Long-term investors often invest regularly regardless of market phase, and the evidence shows that missing rising markets can be costly.