Defining a "Bull Market"
You may be hearing the term “bull market” recently - what does that mean and why is it so important? Let’s break it down.
A bull market represents the collective and sustained rise in prices or expected rise in prices. This can be for any type of financial market - stocks, bonds, commodities, etc. We are experiencing a bull market in equities (stocks) right now. For stocks, it represents growth, optimism, and investor confidence within that market. And it also signals a strengthening and strong economy. Technically, it’s a 20% rise in stocks prices after experiencing a 20% decline.
It’s relevant now because this year marks the 9th year we’ve been in a bull market with equities. The S&P has quadrupled in value since the bottom in 2009.
A few key contributions to note for this bull market:
Overall, the strength of the economy is the primarily driver - second quarter GDP (stands for “Gross Domestic Product” and is an economic indicator of the health of country) grew at 4.2%, which is the fastest pace in almost four years.
Rising corporate earnings - as second quarter earnings season is wrapping up, there has been a 25% increase in profits. This is mainly due to increased consumer & business spending due to tax cuts.
Apple recently became the first company to reach $1 trillion in market value and represents 4% of the S&P’s value. Apple’s stock is trading at 18 times the price it was trading at since March 2009, mainly driven by iPhone growth.
You may have heard of the term “F.A.N.G.” - this stands for these four companies: FaceBook, Amazon, Netflix, & Google. — combined, these four companies have contributed to $2 trillion in market cap since the beginning of the bull run.
Since 2016, stocks have continued to climb higher despite the Fed increasing interest rates (which usually has a negative impact on stocks), increasing geopolitical risks (particularly with N. Korea), and the uncertainty with the beginning of the Trump presidency.