What is a 'Boom'

A boom refers to a period of increased commercial activity within either a business, market, industry or economy as a whole. For an individual company, a boom means rapid and significant sales growth, while a boom for a country is marked by significant GDP growth. In the stock market, booms are associated with bull markets, whereas busts are associated with bear markets.

Booms are often medium- to long-term periods of economic or market growth and may eventually turn into a bubble. A bubble is when the boom extends far beyond the fundamental growth trend in value where buyers become "irrationally exuberant." Some examples of booms that eventually turned into asset bubbles was the bull stock market of the mid-1990s that became the tech bubble that popped in 2001. Another was the boom in housing prices throughout the early 2000s that turned into the real estate bubble of 2008-09. From 2010 through mid-2018, global equities markets have been experiencing a long-term boom.

BREAKING DOWN 'Boom'

Stocks that suddenly become very popular and gain strong, elevated market profits are the result of a stock boom. An example of this is the internet technologies boom or "dot-com bubble" that occurred during the late '90s. This was one of the most famous booms in stock market history.

A company or industry boom results in an increase of output, jobs and investment in that industry. Certain events can be citywide or nationwide booms for business activity, such as hosting the Olympics, which translates into capital investment, TV broadcasting deals, sponsorship deals and tourism. TV broadcasting revenue alone was estimated to be $4.1 billion for the 2016 Summer Olympics in Brazil.

Conversely, a downturn in a particular industry or financial sector can result in a bust for an entire city or state, especially if the region has invested too heavily in that industry or sector. Arizona and Nevada became mired in an economic slump because they were hit hardest by the real estate bust and resulting mortgage crisis of 2007.

The cyclical nature of the market and the economy in general suggests that every strong economic-growth bull market in history has been followed by a sluggish low-growth bear market.

If a boom extends beyond its reasonable life, or if prices extend far above the boom's initial trend line, a bubble may form that has the potential to pop and thus turn a boom into a subsequent bust. Several such instances have occurred throughout the globe over the course of history, from the Dutch Tulipmania of the 17th century to the Great Recession of 2008.

Trending Booms and Busts in the United States

On a more aggregate level, a boom is indicated by increasing output and income, employment, prices, profit and interest rates. Economic observers break aggregate U.S. data down state by state in order to see the amount that each state contributes to variables such as real GDP per capita and real GDP growth per capita.

The U.S. states that experienced the highest growth in real GDP per capita from 2000 through 2015 were North Dakota, South Dakota, Oregon, Oklahoma, Nebraska, Montana, Iowa, New York, Vermont and Texas. The U.S. states with the lowest rate of real GDP growth per capita during this same period were Nevada, Georgia, Arizona, Delaware, South Carolina, Michigan, Idaho, Florida, Missouri and North Carolina. The first set of states were considered to be sustaining a long-term boom, whereas the second set were considered to be suffering a long-term bust.

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