Rally – (noun) a period of continued increases in the price of stocks, bonds, indexes, or other values. (verb) to increase the price, strength of something; to recover or gain value.
Rally is a very common word to see in English and can be used in all sorts of ways. You might be quite happy with the Trump rally, only then to go rally against Trump. Maybe you even try to rally for Trump because of the Trump rally. This can all be quite confusing. Luckily for us, we will try to make things a lot less confusing today.
We will look at “rally” in terms of investing and stocks, which generally can be seen as a positive. A rally is some sort of increase in prices in the stock market, which of course is a good thing; the higher the price is, the greater value you are and could be generating. Pretty much any sort of sustained upswing in the market can be referred to as a rally.
There are two different types of rallies we can look at, which we have discussed before. There is a bull rallies and bear rallies (check out our previous post explaining what a bull and bear means).
A “bear rally” is a short term increase in value during a general decline in the market, while a “bull rally” is an increase or expected increase in the market, characterized by optimism and confidence.
Let’s look at “rally” in action. Below is an example from Bloomberg News talking about stocks in Asia:
As you can see, “the surge in oil” is a key phrase that helps the global equities rally. A “surge” is a sudden increase, particularly in price.
Asian markets are not the only place that are experiencing a rally. The US stock market is also rallying:
The U.S. stock market has hit a series of records of late, a rally spurred in part by the first-quarter earnings season, which was the strongest in nearly six years.
It is also important to see here that the rally is spurred, or encouraged, by the first quarter of the earning year. This is an important aspect of the term rally; a rally often is a short term even, possibly lasting a fiscal quarter or possible longer (maybe even a few months). Eventually, however, there is an expectation that the rally will end, prices will fall, and the market to return to an equilibrium.