Stocktake: This may not be ‘just a bear market rally’

While coast not yet clear, investors should not assume recent strength is temporary

Stocks enjoy multiple large rallies in bear markets. Photograph: Dara Mac Dónaill

Stocks enjoy multiple large rallies in bear markets. Photograph: Dara Mac Dónaill

 

Stocktake has cautioned recently that big but brief counter-trend rallies are common in bear markets, so investors shouldn’t view recent strength as evidence that the coast is clear. That said, nor should investors make the mistake of assuming that the recent strength is temporary, says SentimenTrader’s Jason Goepfert. The S&P 500 has now regained half of the value it lost during the vicious sell-off that climaxed on March 23rd.

Clawed back

It’s “common knowledge” that stocks enjoy multiple large rallies in bear markets, says Goepfert, but the recent rebound has been especially impressive. He examined past instances where stocks quickly clawed back at least a third of their losses. Not a single one, as it happens, was “just a bear market rally”.

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