Though the two don’t always move in strict tandem, bull markets often reflect an “up” period in the general economy — specifically, the expansion phase of a business cycle.
The main characteristics of a bull market include: Investors buy more stock: Their prices have been going up, and investors are convinced they’ll keep doing so, so they keep buying. This raises prices even higher, due to supply and demand.
Companies bet more on their future: Buoyed by consumer buying, businesses make more investments, which usually means hiring more workers and paying existing employees more money.
Unemployment rates go down: And average wages go up, as companies compete for workers. Workers are also more likely to look for a job since they have a better chance of finding one paying them more.
Money is easier to spend: After all, it feels like it will be relatively easy to get more.
And that means risking excessive inflation: All that money being spent can lead to prices going up too much.