The 4 Main Reasons Why the Bull Market Has Reached Its Longest in History


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Beating a record of 3,452 days, the bull market has officially become the longest in history. But, what exactly does that mean? Let’s start with learning a little bit more about what a bull market actually is.

What is a Bull Market?

A financial market made up of a group of securities where the prices are constantly rising, or even expected to rise, is known as a bull market. Generally, the term bull market is used while referring to the share or stock market. However, the term can technically even be applied to commodities, currencies, bonds, and anything else that is traded.

When Does a Bull Market Occur?

Typically, bull markets take place in two situations. The first is when the economy is strengthening. The second is when the economy is already quite strong. Some of the characteristics of a bull market include a strong Gross Domestic Product (GDP), a rise in profits, a fall in unemployment, and a rise in investor confidence.

The Current Bull Market

On 23rd August 2018, the equity bull market recorded an ongoing duration of 3,453 days. According to S&P Dow Jones Indices, this makes it the longest bull market on record. Since the 9th of March, 2009, which is considered the commencement date of the bull market, the S&P 500 has surged 323%. This means that its annualized return is 19%, which isn’t as great as the record of 22% but is still considerably high.

The Reasons Behind the New Record

Let’s take a look at what is driving the current bull market:

1. Earnings Growth: Generally considered the backbone of the bull market, earnings growth is almost always linked to stock-price acceleration. Over the last nine and a half years, the market has seen large profit expansion. Of the last 35 quarters, there’s been growth in 30 quarters.

2. Buybacks: The easiest way for shareholders to boost their stocks in the share market is with buybacks. In buybacks, the pool of outstanding shares shrinks, while repurchases provide a safety net of sorts for the stock prices. When the S&P 500 corporate-profit growth hit a slump in 2015 and 2016 for five straight quarters, buybacks were available to cushion the blow.

3. The Federal Reserve: Undoubtedly, the Federal Reserve is one of the largest driving forces behind the boosted share prices in the market. Right after the financial crisis in 2008, the Federal Reserve stepped up, with the central bank purchasing USD 600 billion in mortgage bonds, helping the housing market when it was on the brink of crashing. Although the Federal Reserve stopped buying bonds in 2015, it did help start the bull market ball rolling.

4. Investor Psychology: An important driving force behind the bull market has been the mentality of the investors. By following a ‘buy-the-dip’ philosophy, and purchasing discounted shares post a major sell-off, shareholders were able to earn better rewards than other investors who had purchased the stock at its original price. Of course, this kind of philosophy only works in a bullish market, leading us to a circle of profit and growth. Since a bull market leads to higher investor confidence and more purchases, it, in turn, makes the economy stronger.

While the bull market appears to be here to stay, it’s a good idea to keep an eye on the share market live updates every day to be able to decide when and how you need to purchase or sell your stocks.