GUATEMALA CITY -- At last, the Nikkei stock average has risen above 10,000 points for the first time in more than a year, rebounding from 7,600 in April. Much of the rally is due to the net buying of Japanese shares by foreign investors as global money managers increase their holdings.
Is this rebound indicative of a stock market recovery or perhaps the emergence of a new bull market? It is tempting to suggest that this may be the case. After all, stock price indices have been in a downtrend for quite some time.
Let's consider what drives a bull market and what distinguishes it from a bear market. Bull markets -- an upward trend in stock-price indices -- emerge when the number of investors who are optimistic about the economy and share prices is larger than the number of pessimists. On the other hand, bear markets -- a downward trend in stock-price indices -- occur when the number of investors who are pessimistic about the economy and share prices is larger than the number of optimists.