Wednesday’s market rebound in stocks and cryptocurrency may signal the onset of a new bull market, but caution is advised as historical analysis suggests such advancements could merely be short-lived rallies amid wider declines.
The recent surge in equity markets, including the S&P 500, which saw significant gains, might be linked to optimistic expectations following President Donald Trump’s announcement of a temporary halt on tariffs. Analysts warn that similar upward movements are frequently observed in bear markets, as highlighted by Goldman Sachs research and other evaluations.
Key Insights:
- Historical analyses indicate that bear markets typically include multiple significant rallies.
- Caution is warranted, even amidst the enthusiasm generated by recent price increases.
“In most bear markets, given light positioning, marginal changes in these variables can have amplified effects on markets. As a result, bear market rallies are quite common,” Goldman’s strategy team led by Peter Oppenheimer expressed.
According to their report, there have been 19 global bear market rallies since the 1980s, averaging 44 days in duration with an MSCI AC World return between 10% and 15%.
“One of the worst bear markets in history saw about half a dozen major double-digit rallies before all was said and done,” stated Callum Thomas of Topdown Charts.
The clarity on whether the current rally indicates a new bull market or just a temporary lift in a bear market will only unfold over time. However, factors suggested by Goldman such as healthy valuations and intervention policies have not yet emerged decisively.
In the meantime, the Federal Reserve appears unlikely to step in to provide stimulus shortly, and the trade tensions initiated by tariffs may escalate again after the proposed 90-day timeframe.
