The S&P 500 index closed at a record high on Friday, surpassing its old high, set in early 2022. The gains show that investors have overcome fears of rising interest rates and panic over a recession that had ruled the stock trading for much of the year. the last two years.

Instead, they are now betting that falling rates will help expand corporate profits while the economy remains on relatively solid footing.

Although the S&P 500 had struggled to reach the record (having bumped into it for weeks before finally crossing it with a jump on Friday), the record high should also end the debate on Wall Street over whether the recent rally in stocks reflected a lasting change in sentiment, or whether it was simply a rally that would fade as fear about the economy’s prospects returned.

To the average person, it doesn’t matter what label analysts apply to the stock market when it rises, but with the new high, they will hear a lot more about the “bull market.”

Here’s what you need to know about the market now.

“Bull market” is not an official designation. There is no governing body to say what it is, or decide when it started (as there is with a recession). But on Wall Street there are two common ways the label is applied.

A bull market is said to be confirmed when a major index such as the S&P 500 rises 20 percent above its most recent low. By that standard, the bull market was confirmed in June, when the S&P 500 closed 20 percent above its October 2022 low.

But some people were quick to dismiss the standard as too easy for the market to meet. They use the second definition for a bull market, in which stocks have to rise beyond their old high.

As of Friday, by both measures, the S&P 500 is in the midst of a bull market.

The current bull market began in October 2022, when the S&P 500 hit its most recent low. Since then, the index has risen about 35 percent.

A bull market can last more than a decade or a few months. Stocks are in a bull market more often than not.

The previous bull market lasted less than two years, starting in March 2020 and ending in January 2022. Before that, stocks were in a bull market that lasted nearly a decade, from March 2009 in the midst of the Great Recession to February 2020, when Covid-19 emerged as a global threat.

The index hit a record high on January 3, 2022, the first day of trading that year. Low interest rates and high consumer spending, fueled by stimulus checks and the rollout of coronavirus vaccines, helped boost it.

“There was a euphoria around what we were savoring as post-pandemic life,” said John Lynch, chief investment officer at Comerica Wealth Management.

But just days later, the Federal Reserve released details of a meeting that suggested the central bank was concerned about inflation and would begin raising rates to slow the economy. The index ended that week down about 2.5 percent, the start of a bumpy decline that continued into October, when shares were 27 percent below their January high.

The Federal Reserve began its rate hike campaign in March 2022, raising the cost of borrowing for businesses and consumers. Worried about a recession, investors dumped stocks as the Federal Reserve progressively raised rates from near zero to a range of 5.25 to 5.5 percent, the highest in 22 years.

Then, the data began to point to a cooling of the labor market and inflation began to moderate. Investors began betting that the Federal Reserve was almost done with its campaign, and once the central bank signaled that it was considering lowering rates in 2024, the decline reversed and stocks surpassed that old high.

Maybe nothing. Certainly, the fact that stocks are going up is good news for those with a 401(k) retirement plan, and even better news for people who have large investments in the stock market (often higher-income Americans). .

But the track record shouldn’t change the behavior of most investors, said Mark Wilson, a financial advisor at MILE Wealth Management in Irvine, California. Wilson advises his clients not to make decisions based on day-to-day news in the financial markets, he says. the said. Often, news that the stock market is up raises fears that it is destined to fall.

“People picture the stock market as a heart monitor that goes up and down, so some people get nervous,” Wilson said. Although the stock market has hiccups and doesn’t break records every day, it generally tends to rise over time, she added.

For people who invest for the long term, Wilson said, what matters is the value of their assets when they need the cash. Additionally, it is important to recognize that the S&P 500 is just an index; A pension or retirement plan will invest money in asset classes that may not all be there at the same time.

Higher stock prices can encourage companies to expand, and for the 60 percent of Americans who own stocks, a bull market means they could feel slightly richer because their long-term savings are worth more. That might make them feel better about their finances, but what’s more likely to make them spend more is the size of their paychecks, according to Rupert Watson, an economist at Mercer, an asset manager.

“The most important thing for people with middle incomes is whether they have a job and whether their salary increases,” he said.

A bull market ends when stocks fall 20 percent below their last high, a period known as a bear market.

The last time the S&P 500 entered a bear market was in 2022, when investors retreated from persistent inflation and rising interest rates.

But even if stocks don’t fall as much, they could pull back a bit.

Inflation is moderating, but some analysts warn it is too early to claim victory. Prices rose 3.4 percent annually in December, below the peak of 9.1 percent in 2022 but still above the Federal Reserve’s 2 percent target.

If inflation trends unexpectedly go in the wrong direction, the Federal Reserve may not cut rates as soon as investors expect.

“The biggest thing that could reverse the rebound is inflation not going down,” Watson said.