What is a Bull Market and How Does it Affect Silver?
A bull market is a time in the financial markets when the price of an asset or security increases steadily. Traditional bull market indicators include optimism, investor confidence, and expectations, or when stock prices rise by 20 percent following two consecutive falls of 20 percent each. Traders use various methods to profit from bull markets, including enhanced buy and hold and retracement strategies. It can be challenging to predict what investors are thinking, and that speculation can, at times, have a massive impact on the markets.
Bull markets don’t have any traits, but they typically happen when the economy is growing or is already strong. A robust GDP and a decline in unemployment will frequently be accompanied by increased business profits and greater investor confidence. For instance, when we recover from the COVID-19 pandemic, businesses will start to increase their output of goods and commodities, resulting in a positive overall demand for stocks.
All markets, whether bullish or bearish, are a component of the four phases of the economic cycle: growth, peak, contraction, and trough.
The start of a bull market is a key indicator of economic expansion. It creates a groundswell of support for potential economic developments and policy changes that boost stock values and generate profits. Investors are eager to acquire securities when there is a lack of supply and high demand, but few will sell. Bull markets will often see an uptick in IPO activity due to the abundance of opportunities.
What does it mean for silver investors?
Investors who want to profit from a bull market should purchase early to benefit from growing prices and sell them when they have peaked. Most losses will be minor and typically transient, notwithstanding the difficulty in predicting when the bottom and peak will occur. With your ability to research and stay consistent on the industry trends, you can anticipate the best periods to enter and exit.
And given the recent dedication to climate change, silver provides security in volatile financial markets on behalf of the government and companies committing to environmental causes. Since the 1960s, there have been six bull markets; we could currently be in the seventh. Traditionally, silver has outperformed gold in five of the previous six bull runs. With sustainable new technologies becoming relevant, it’s a good time for investors interested in silver mining stocks, companies, ETFs or bullion.
Silver has the highest thermal and electrical conductivity, and it’s used in things like smartphones, laptops, cars, household electronics, televisions, microwaves, and refrigerators. Its use is a staple in healthcare devices — surgical tools, catheters, prosthetic heart valves, and other devices all use silver.
Additionally, renewable energy devices and systems play a key role in growing silver production fuelled by demand. It’s an essential ingredient in solar panels and batteries for electric cars. Silver remains a haven investment against political unpredictability and economic hardship while being a more affordable and superior alternative to gold. Its usage and applications are expanding.
Strategies to maneuver in a bull market
There are a variety of strategies that investors use during a bull market. They include:
Buy and hold
With precious metals like silver, its price tends to thrive off geopolitical insecurity, a lower U.S. dollar, the industrial recycling industry and a demand for jewelry and silverware. In bullish markets, many investors will continue to add to their holdings in a particular stock so long as it increases in price.
There are times within a bull market with prices will flatten or dip in some circumstances. Investors often expect the price to continue to rise despite the levelling and look to buy on the notion that the price will quickly jump after a change in circumstances.
Full swing trading
The practice of full-swing trading is arguably the most aggressive technique to try to profit from a bull market. As shifts occur within a bigger bull market, investors following this strategy will play highly active roles, using short-selling and other methods to extract the most rewards.
The stock market has been amidst a tenacious bull market since the significant market sell-off during the 2008–2009 financial crisis, rebounding considerably and reaching new all-time highs (despite some sharp pullbacks). Growing GDP, high employment, and a robust production economy indicate that earnings will increase, which could be reflected in rising stock prices.