Bull Market

A bull market is a period of sustained rising prices - conventionally a 20 percent rise from a recent low - driven by economic expansion, rising earnings and optimism that feeds on itself. The ASX has run through several: the 2003 to 2007 commodity boom, the eleven-year climb after the 2009 low, and the post-2020 recovery. Bull markets are only named in hindsight; while they are running, they are simply 'the market'.

The arithmetic is the part that matters to a portfolio. Most of the long-run return arrives in concentrated bursts: the ASX 200's best days cluster inside bull markets, and an investor who missed the ten best days over twenty years roughly halved their ending balance. The behaviour is the mirror: euphoria pulls new money in at the top, concentration builds in whatever has already risen, and the bear market entry covers what happens when the direction reverses. Dollar-cost averaging through a bull market is the discipline the euphoria argues against.

Walk the anatomy. Earnings rise, the economy expands, and prices climb ahead of both - the market prices the optimism before the results confirm it. Media coverage intensifies, new investors arrive, and the inflows push prices further, which attracts the next wave. The volatility entry covers the daily swings that fade inside a bull market, because rising markets suppress the fear that creates them.

The return arithmetic is the second mechanism. Over the twenty years to 2025, the ASX 200 returned roughly 8 to 9 percent a year with dividends reinvested, and a disproportionate share of that arrived in a few hundred trading days. An investor who missed the ten best days held roughly half the ending balance; the ten best days were almost all inside the recoveries that followed the worst ones. Timing the exit is easy in hindsight and unreliable in practice, which is why the schedule beats the forecast.

The behaviour is the third mechanism, and the expensive one. New money arrives disproportionately at the top - the account balances confirm it - and concentration builds in whatever has already risen, because the winners look safest after they have won. The 2007 peak pulled a record cohort of first-time investors in weeks before the drawdown; the 2021 crypto-and-growth peak did the same. The dollar-cost averaging entry covers the schedule that buys through the euphoria instead of pausing for it.

For an Australian reader, the bull market is where the long-run return is actually delivered, and where the behavioural damage is done at the same time. The return is real: the ASX's long-run average with dividends reinvested is roughly 8 to 9 percent, and the bull phases are where it compounds. The risk is not the market; it is the decisions made inside it - the all-in at the top, the concentration in the winners, the super option switched to last year's high-growth performer. The index fund entry covers the option that holds the whole market instead of chasing it.

A colleague named Brent (yes, that Brent) moved his entire portfolio into the year's best-performing sector at the top of the 2007 bull market, because the winners looked safest. The drawdown took the sector twice as hard as the index, and he sold near the bottom. The bull market delivered the index's return to everyone who held it; his timing delivered the opposite. The highest-leverage thing most Australians can do is keep the schedule buying through the optimism, and run the investment calculator on the ending balance the boring version produces.