Investors keep track of individual stocks, but it’s also important to keep an eye on the market as a whole. “Bull” and “bear” markets refer to the way the market tends to rise and fall over the course of time. But what is a “secular bull” market? And can we expect the market to act bullishly anytime in the near future?

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Secular Bull Market: Definition and How It Works

A “bull” market refers to the tendency of stock prices to rise more than they tend to fall. This setup doesn’t mean that stocks can never dip in a bull market, only that companies see gradual improvement despite a few dips now and then.

So what is a “secular bull” market? A secular bull market refers to the tendency of markets to see rising stock prices over an extended period of time.

Secular vs. Cyclical Market

The key to understanding secular markets lies in the word itself. “Secular,” from the Latin saeculo, meaning “age” or “long age,” implies that the market experiences a long-term trend. A secular market is therefore associated with technological innovation and economic expansion. It can be thought to last for months or even years.

By contrast, a “cyclical market” refers to the tendency for the market to move up or down in a much shorter span of time. A cyclical market can likewise refer to the movement of a narrow market sector rather than the market as a whole.

Secular Bull vs. Bear Markets

There can be both secular bull and bear markets. In a secular bear market, prices tend to drop more than they tend to rise. Again, this refers to the market as a whole, so it may not necessarily refer to individual stocks or even sectors within the market.

Still, secular bear markets reflect long-term pricing conditions, just as bull markets reflect a general upward market trend.

What Happens at the Conclusion of a Secular Bull Market?

As a general rule, a secular bull market concludes when securities decline in price by 20% or more from recent highs. Alternatively, a bull market can also end when prices consistently decline for two months or more. When this happens, it usually triggers the beginning of a bear market and is often associated with a decline in investor confidence.

Examples of a Secular Bull Market

There are two clear examples of a secular bull market in the recent past. The first happened in the 1980s, while the second happened in 2009.

Bull Market: 1983 to 2000

One of the greatest periods of economic growth happened in the period between 1983 and 2000. Corporate profits were up, and investors could easily maximize their investments. As a result, this became one of the most famous secular bull markets in history.

Bull Market: 2009 to 2020

From 2009 to 2020, the S&P 500 stock index climbed from 676.53 points to a peak of 3,386.15 points on February 19, 2020. This growth represents an increase of over 400%. Unfortunately, the COVID pandemic brought this favorable period to an abrupt close, and investors are still waiting for a day when the market might turn around.

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How to Invest in a Secular Bull Market

A bull market means that there is a greater probability of profit from your investments. Investors can make the most from a secular bull market by practicing the following habits:

Stick to Your Goals

Assessing your investment goals is a good habit regardless of how the market is performing. But in a bull market, it helps to evaluate your goals so that you can devise a strategy to meet them.

For example, if your goal is long-term growth, then you might find ways to leverage growth stocks from large, established companies. But if you want to generate short-term gains, you can take the risk and invest in smaller startups.

Take Greater Risks

Bull markets can be wise times to invest in that small, risky startup. When the market as a whole performs well, you’ll have a greater ability to absorb risk. With that being said, make sure to integrate these stock picks into a well-balanced, diversified portfolio.

If there’s ever a time to put money into small-cap stocks, it’s during a season when the market is performing favorably, giving you time to monitor your investment and reevaluate your decisions if things take a turn.

Consider Cyclical Stocks

Some companies maintain even performance no matter what the market brings. Consumer staples stocks, for example, tend to remain even throughout the year and regardless of the market as a whole. But cyclical stocks can see dramatic changes in price in a short period. These companies include businesses such as:

  • Travel stocks
  • Tech stocks
  • Real estate stocks
  • Automotive stocks

Sometimes a bull market will be the result of a boon in one or more of these industries. Buying stock in these categories can help you take advantage of rising prices and potentially profit by selling when the market starts to dip.

Diversify Through ETFs, Index Funds, and Mutual Funds

A “fund” refers to a collection of assets rather than selecting individual stocks one at a time. Investing in an index fund, mutual fund, or exchange-traded fund is a great, simple way to build additional diversity into your existing portfolio.

If you plan on investing in some small-cap startup companies, having a diverse portfolio can protect you against losses. When you want to invest in a particular sector, many brokers offer ETFs and mutual funds built around a particular industry, such as tech stocks.

Monitor Your Investments Carefully

The goal of every investor is to buy low and sell high. But in order to do that, you’ll need to find the right time to buy and sell. Many investors use the dollar-cost averaging technique when purchasing stock, which means that you purchase shares slowly over time to ensure you don’t get blindsided by a major price shift.

Once you own this stock, you’ll need to keep an eye on its performance and sell once you see the price reach a plateau — or if it starts to dip.

Cut Your Losses Early

Investors who purchase small-cap stocks should keep an eye on how these companies perform. It’s true that there’s less risk in a bull market, but investors should still be quick to jettison underperforming stocks to avoid a financial loss.

If this is done early enough, investors can still take advantage of the market conditions and find another company to invest in.

When Can We Expect Another Secular Bull Market?

Is a secular bull market around the corner? While it’s hard to say for sure, some economists are predicting that the market will take a bullish turn before the end of 2022.

Still, the increasing rate hikes from the U.S. Federal Reserve may represent a need for caution. While it’s hardly uncommon for stocks to rally in the middle of a bear market, the market as a whole may still be some distance away from bullish conditions.

Additionally, inflation might mean that some stocks are currently overvalued. Investors might be able to snag these stocks if prices normalize, but for now, some companies may lie outside of the average investor’s price range.

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