Bull market

The term describes a market that trends upwards over months or years, with rising prices and generally confident investors. There is no official definition, but a common convention dates a new bull market from the point when an index has risen 20% or more from its most recent low. Bull markets usually coincide with growing company earnings, a healthy economy and, often, low or falling interest rates. They are rarely smooth: prices can drop sharply for a while, including corrections of 10% or more, without the overall upward trend ending.

Bull markets have historically lasted longer than bear markets, which is one reason long-term investors in diversified shares have been rewarded for staying invested. The label is only clear in hindsight, however: nobody knows in advance when a bull market will start or end. Long rises can encourage overconfidence, heavier borrowing and a drift into riskier holdings, which leaves investors more exposed when conditions turn. Many investors guard against this by keeping an asset allocation they could live with through a downturn, and by rebalancing when strong gains push shares above their intended weight.