Events that can cause a Bull Market

A bull market is characterized by an extended period of rising stock prices. Typically, in a bull market prices rise by at least 15 percent, while at least 80 percent of all share prices are on a rising spike. This sustained increased in market prices is the result of rising consumer confidence. As investors trust the market, they massively buy more shares and trust the financial markets with their money. This strategy leads to multiple gains in major indexes, including the S&P 500 the Dow Jones Industrial Average (DJIA). As the gains grow bigger, investor confidence rises further.

The typical causes of a bull market can be summarized as follows:

1. Consumer confidence

Consumer confidence can significantly influence the stock market. When investors feel confident about the market, they spend more. Rising consumer spending has a favorable effect on corporate profits and share prices as investors feel that they can trust the financial markets with their money and invest in profitable listed companies.

2. Consumer expectations

Consumer expectations about the economy define stock market movements. If consumers feel confident about the economy and interpret the economic news in a positive way, they invest their money in the stock market, thus causing the share prices to rise. The more positive consumer expectations are, the more the stock market continues to rise. In fact, consumer expectations cause market movements because they reflect raw emotions.

3. Investor psychology

The way investors react to news about the economy determines their investment decision making. Human emotions and psychological traits define stock performance. In a bull market, investors actively participate in the aim of capitalizing in market opportunities and realizing the highest possible return relative to the level of undertaken risk. Market sentiment is positive and as investors keep on putting their money in securities, the rise in share prices boosts investor confidence, which causes investors to put more money in the stock market, which keeps on rising.

4. General state of the economy

The general state of the economy influences the stock market as companies that participate in the stock exchange also participate in and have a strong influence on the greater economy. A bull market is strongly related to a strong economy as most companies are profitable due to rising consumer spending. The rising corporate profits are directly related to an upward trend in the stock market.

In conclusion, in a bull market, investors aim at capitalizing on the rising prices by buying low and selling high. This trend is continues as long as investors have faith in the market and the general state of the economy and feel that they can make profits by investing in equities.