Many investors have been encouraged by recent U.S. stock gains and were quick to suppose that a bear market exit is near. This included a 10% gain by the S&P 500 from mid-July. However, experts are not entirely convinced by this.
Interactive Brokers chief strategist Steve Sosnick warned the investors “not to be fooled” by these positives. According to him, recent rallies are just part of the process.
“That’s why I like to call that socially acceptable volatility,” Sosnick explained. “The other term, which is not as polite, it was a bear market rally.”
In a chat with Yahoo Finance, HSBC chief multi-asset strategist Max Kettner also said that he doubts the recent rally will hold up.
“It still looks a bit wobbly,” said Kettner. “To me, there’s this bear market rally we are seeing because the underlying fundamental data looks really pretty weak.”
The bear market happens during the time of prolonged price declines in overall markets or indexes. It is usually considered that the market has entered the bear market when the prices fall 20% or more from the recent peak during an extended period. Similarly, when the overall market or an index like the S&P 500 saws a prolonged increase of 20% from the recent low point.