- Wednesday’s market rally, which saw significant gains in stocks and crypto, may be a temporary bear market bounce rather than the start of a sustained bull run.
- According to Goldman Sachs, bear market rallies typically last about 44 days with returns of 10-15%, and are common even during larger downturns.
- Key indicators of a sustained market bottom, such as attractive valuations and policy intervention, are not yet evident in the current market environment.
Investors should remain cautious about Wednesday’s dramatic market turnaround, which saw the S&P 500 post its largest single-day gain since 2008 alongside significant increases in Bitcoin (BTC) and the broader crypto market as measured by the CoinDesk 20 (CD20) index.
The rally was triggered by President Donald Trump‘s announcement of a 90-day pause on tariffs, sparking social media optimism about an extended bull run in both equities and cryptocurrencies. However, market analysts suggest this enthusiasm may be premature.
Bear Market Rallies Are Common Historical Patterns
“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,” explained Goldman Sachs’ strategy team led by Peter Oppenheimer in a Tuesday note titled “Bear Market Anatomy – the path and shape of the bear market.”
The investment bank’s research identified 19 global bear market rallies since the 1980s. On average, “they have lasted 44 days and the MSCI AC World return is 10% to 15%,” according to the report.
Callum Thomas, founder and head of research at Topdown Charts, reinforced this view on X (formerly Twitter), noting: “One of the worst bear markets of history saw about half a dozen major double-digit rallies before all was said and done,” referring to the 1930s market crash.
Current Market Lacks Key Bottom Indicators
Whether Wednesday’s bounce signals a new bull run or merely a temporary rally won’t be immediately clear. However, several characteristics that typically mark a sustained market bottom—identified by Goldman Sachs—are notably absent from the current market environment.
These missing indicators include attractive valuations, extremely negative investor positioning, policy intervention, and a deceleration in macroeconomic deterioration.
The Federal Reserve is unlikely to provide supportive measures soon, while Trump’s tariff pause is only temporary at 90 days, suggesting trade tensions could escalate again in the near future. Additionally, tariffs on China continue to increase, and by most measures, stocks are not yet considered cheap.
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