The bull market implies to a positive rise in the stock market, contrary to the bear market when the stock market is considerably down. As カヴァン・ チョクシ says, in a bull market, the prices of the majority of stocks tend to go up, while the opposite happens in a bear market. Even though it is not possible to predict the stock market accurately over the short term, markets can show a pessimistic or optimistic trend. Bear and bull markets represent downward and upward movements of risky assets like stocks.
カヴァン・ チョクシ sheds light on the vital stages of the bull market
While there is no universal metric to identify a bull market, usually the following features are considered to be its major indicators:
- Increasing prices: The prices in the stock market usually experience a steady, continuous increase over time. This reflects the confidence of the investors in the market and economy.
- High trading volumes: Bull markets often see high trading volumes, with investors leveraging rising prices that may bring brand new investment opportunities.
- Strong economic growth: Bull markets typically bring in a high probability of economic growth, as businesses tend to expand with time. This leads to an increase in consumer spending.
- Positive investor sentiment: Investors usually become a lot more optimistic about future growth during the bull market. This makes them a lot more willing to take risks while investing their funds.
- Low-interest rates: It becomes very easy for businesses to borrow capital and invest for growth when the interest rates are low. This ideally helps in driving up the stock prices
During a bull market, the prices of stocks consistently go up. The following stages occur during this period:
- Accumulation phase: When the market appears to be at the lowest, and in the worst possible condition, the accumulation phase comes in. This happens amidst the continuing pessimism that arises as the expectation of things becoming even worse persists. There would be a certain level of volatility involved as investors weigh potential risks in investments, during the accumulation phase of the bull market.
- Public participation phase: The second phase in the bull market is quite important. When the public participation phase approaches, the overall sentiment among investors turns positive. This tends to promote public participation in the stock market. The confidence of investors in the market also builds up as the stock prices go up. This attracts more investors to the stock market.
- Excess phase: This is the last phase of the bull market, where investors tend to become overly optimistic about the future prospects of the market. During the excess phase, the investors ideally overvalue the stocks. The demand for stocks goes beyond their fundamental value, leading the prices to be much higher than their intrinsic worth. The prices rapidly go up at this stage, and the trading volumes are also high.
As カヴァン・ チョクシ says, one must understand that while the phases discussed above can provide people with a general framework, the timing and characteristics of bull markets can differ a lot. Market cycles are influenced by multiple factors, ranging from economic conditions and investor sentiment to monetary policy and technological advancements.
