The seven year run of the American bull market seems to be drawing to a close. While it is not quite time for investors to hit the panic button, it is very possible that the market may have reached its peak. As stocks begin to decline, investors are preparing themselves for a bear market, wherein the stocks have declined by 20% or more. Other than talking a lot about animals, what do these market-types mean for the investor?
A bull market is exactly what causes investors to rejoice. In a bull market, everything is on the upswing; the economy is great, jobs are increasing, and GDP is growing. Choosing where to invest during a bull market is fairly easy, because everything is going up. Unfortunately, bull markets never last.
Sometimes bull markets can lead to dangerous financial situations for individuals as they invest in stocks that are overvalued. This leads to a dangerous crash in their financial situation as the true value of stocks emerges. People who are eternally optimistic about the stock market rising are considered “bullish,” and are always looking on the bright side, even when statistics say otherwise.
In the land of stocks, bulls are good and bears are bad. A bear market occurs when the economy is bad, a recession is looming and the stock prices are decreasing. Bear markets make it difficult for investors to choose profitable stocks. While some resort to short selling while in a bear market, many other investors choose to wait it out and only buy when a bull market seems to be on the horizon.
America’s Bull Market
Since the peak of the recession in 2009, the S&P 500 has nearly tripled, up 194%, a surge that reflects the American economy’s recovery from the great recession. Yet, this bull market appears to be headed for a close. The year 2016 began with plummeting oil prices, and fears of a new global recession.
Many expert investors believe the prime area of the bull market has already closed. While investments are still good, and better than a bear, they are not going to show the incredible return on investment that they would in the height of a bull. While seven years is not the oldest bull market in history, it is getting up there in age.
Where We Go From Here
Being able to predict where the market will go from here is an incredibly tricky venture. The three primary influencers include oil prices, the Federal Reserve and the U.S. economy. While some believe this bull market may have one more high return year left, it is anybody’s guess how everything will genuinely play out.