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The stock market is now officially in a new bull market as it is up 20% from the bottom! This is the “official” definition of a bull market. A “bear market rally” is a short movement upward of 10 to 20% during an overall long term bear market. What is a bull market anyway? A simple answer is that a bull market occurs when financial market is in an overall upward trend and investors are feeling confident in investing in that market. This is opposed to a bear market when investors are feeling pessimistic about the market and it is in an overall downward trend. The bull and bear mentality is related to the metaphor of humans acting as herd animals with regard to investing in financial markets.
Have you ever gone to a dreadfully busy place and just naturally followed the crowd into the longest line just inside the door? It is interesting how that happens so easily even for those who are not normally “crowd followers”. Then you spot another much shorter line. You think to yourself “There must be something wrong with that line. No one is in it!”. Sure enough you find the boldness to suspiciously move over to that other shorter line only to discover that it is going to the exact same place as the other line but you are going to get there quicker! Don’t you just love it when that happens? Disneyworld comes to mind for me having been there several times with my family. My husband and I laugh as we “moo” in line. In the past I have seen leaving the heard in the investing arena play out in a similar fashion. Leaving the herd requires observing what everyone else is loathing. There is always fear about leaving the crowd and usually for a good reason however. This is what keeps us with the herd.