Are we in a bull market?

Yes, but there isn’t one clear definition for what a bull market is, so it can be a little tricky. The technical definition of a bull market is when the price of a broad market index (like the PSEi) is up 20% from its recent low. In our case, the PSEi hit a sharp low of 6,158 after a three-month period of decline on June 21, so applying the rule we would say that we are in a bull market when the PSEi is at or above 7,390, which we were on September 26 and 27. Does the fact the PSEi closed down below that 20% threshold mean that the bull market is off? Not necessarily, because the 20% rule isn’t absolute. We must consider the broader state of investor sentiment, the context of economic conditions, and whether there are any sustained uptrends in either. In this case, investor sentiment is high and buzzing, economic conditions (interest rates and inflation) are improving, and both of these are not sudden but the result of longer uptrends. A bull rally isn’t necessarily dead if it dips the PSEi below the 20% threshold for a day or two, thanks to those other factors, but if the PSEi continues to retreat we might have to put our party hats away for a bit.

MB bottom-line:  Bull markets are not equally kind to all stocks; certain sectors are usually disproportionately pumped during a bull rally (like Financials and Property in this case) while other sectors are essentially left untouched or are sold down significantly (like Mining and Oil in this case). Even within one of those sub-indices, there can be huge discrepancies in price performance over that full bull rally. Another important thing to remember, especially for new investors, is that there’s nothing tangible holding any bull rally up. Just like everything that happens on the exchange, what happens depends on the aggregate action of thousands of individual actors buying and selling in their own best interest. Regardless of why, the party could be over soon if a good number of those individual actors lose the vibe and start to get defensive. FOMO is real. When you’re at the bull party, dance with the strategy that brought you. Observe, measure, and learn. Do not take random stabs and hope for the best.
 

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