Bull Market

Ever since the fall of feudalism, capitalism; with its foundational principles of liberal laissez faire government, individual property rights and market driven economy, has been the dominant system of economic organisation the world over. Though many countries in the Asian and African continents still have remnants of the feudal system, a majority of national economies have integrated themselves in the world system of market driven enterprise.

Prominent in this system is that American model of finance capitalism which gives almost a complete autonomy to multinational finance capital. The model has been dominant ever since the expansion of American industry in the 19th century. The only real challenge, theoretical as well as practical, to this model was presented by the Marxist school of thought and its practical application in terms of a socialist or a communist economy. Though it started out on the right note, refusing the instability and 'inherent contradictions' of a market driven economy, the Marxist model later faltered to reinvent itself in the form of state capitalism as in the case of China and erstwhile Union of Soviet Socialist Republics (USSR).

Bull Market: The Background

The fall of the Soviet Empire is said to have exposed the world economy to the mercy of two well known beasts of the market- The bear and the bull. While the former is considered to be ominous to the welfare of common people and investors in particular, the latter is seen as positively beneficial who indulge in stock market investments. However, irrespective of the fact whether the market is showcasing an upward swing (the Bull Market situation) or a downward swing (the Bear Market situation), investors need to be on their tows nevertheless.

Especially deceiving is the bull market scenario. Investors, in the frenzy of popular investment enthusiasm and potential profits, tend to forget the fact that trends like the bull market also have their own limitations and can transform themselves into something very dangerous for their investments.

Bull Market: Meaning, Scope and Implications

Before delving onto the concept of bull market, it is necessary to understand its financial moorings. This necessitates us to understand the very meaning and nature of the phenomenon of a 'market trend' and it's long and short term variants. A market trend is the supposed streak within a financial or more particularly a stock market to move in a particular direction. In simple words, it is an apparently predictable price tendency in a share market depending upon the market situation. Now market tendencies can be broadly classified into 'secular market trends' for long term time spans, 'primary market trends' for medium term time spans and 'secondary market trends' for short term time spans. A secular market trend lasts for a period anywhere between 5 to 25 years and constitutes of a number of primary trends. On the other hand, primary trends lasts for one year or more, whereas, secondary trends last for a few weeks or a few months.

Bull market is a type of primary market trend. It involves increasing confidence on the part of investors; whether institutional or private, in the profitability of investment in the share market. This leads to actual increase in the investment in company stocks in anticipation of further price increase, culminating in a general upward trend in the market as a whole. Though it is primarily used for share market situations it is not limited to only that and can also be applied to currency, bonds and the commodities market. A classic example of the bull market trend is period between 2003 and 2008 during which the Bombay Stock Exchange went through a bull market phase, increasing from a mere 2,900 points to a staggering 21,000 points.