One school of thought says that a bull market exists when at least 80% of all stock prices rise over an extended period. Another school of thought also says that a bull market exists if market indices rise at least +15%. Of course, different market sectors may experience bull markets at different times.
The probable causes and characteristics of bull markets vary, but most financial theorists agree that both economic cycles and investor sentiment both play a role in the creation and momentum of bull markets. In general, a strong or strengthening economy, indicated by high employment, high disposable income and high business profits usually ushers in a bull market.
Rising investor confidence also indicates a bull market and is perhaps more powerful than any economic indicator. When investors believe something is going to happen (a bull market, for example), their actions can turn it into a self-fulfilling prophecy. Although difficult to quantify, investor sentiment can show up in mathematical measurements like the put/call ratio, the advance/decline line, IPO activity and the amount of outstanding margin debt.
In a bullion market, when the market is booming, your share trading approach should be to purchase fundamentally healthy firms, which would earn you big returns whether you are an shareholder in Ghana, Africa or wherever else in the global share market. It is often important to notice and appear for firms with the golden tracking characteristics:
- Earnings that are rising sooner than average.
- Conducting business in a healthy sector.
- Operating in a rising market.
In times of duress, use market volatility as a gauge for your risk tolerance. When market conditions return to calm, fine-tune your approach to investing to be better prepared next time. Don’t worry, the market always survive the shocks.
Please remember the value of investments can go down as well as up and you may not get back the amount you initially invested. If you have any doubts about which investment product is right for you please contact your financial adviser.
The Stock Scientist 