Be cautious about the market surge observed on Wednesday, which had the S&P 500 index jumping the most since 2008, alongside impressive gains in bitcoin (BTC) and the overall crypto market, reflected by the CoinDesk 20 (CD20) index.
This upswing was triggered by President Donald Trump’s declaration of a 90-day suspension on tariffs, resulting in social media buzz and speculation about a potential sustained bull market in both equities and cryptocurrencies. Analysts from Goldman Sachs and others caution that such multiweek, double-digit rallies are not unusual, even amidst significant bear market conditions.
“In many bear markets, with light positioning, slight shifts in these factors can lead to exaggerated moves in the markets. Consequently, bear market rallies occur quite frequently,” explained Goldman’s strategy group led by Peter Oppenheimer in a recent note titled “Bear Market Anatomy – the path and shape of the bear market.”
Historically, there have been 19 bear market rallies globally since the 1980s, with an average duration of 44 days and an MSCI AC World return ranging between 10% to 15% during these periods, the report indicated.
“One of the most severe bear markets in history featured several major double-digit rallies before it concluded,” stated Callum Thomas, founder and research head at Topdown Charts, in a post on X, referencing the 1930s. “Is this 90-day bounce a bear market rally?”
Whether this recent surge indicates the start of a new bull market or is simply a bear market rally will take time to clarify. However, specific signs of a lasting market bottom, such as appealing valuations, extreme negativity in positioning, policy measures, and a slowdown in economic decline, are not yet apparent.
It seems unlikely that the Federal Reserve will provide support in the near future, while Trump’s tariff pause is only temporary. Ongoing increases in tariffs on China continue to be a concern, and additionally, the valuations of stocks remain unappealing.