Bear market rally example
A recent example of a bear rally occurred during the 2022 bear market, which lasted 10 months. The S&P 500 fell 25% from its peak, bottoming out in October 2022. It began to bounce back in 2023, climbing almost 20% between January and August.
Yet the year-to-date gain by October 2023 had fallen to only 7.2%. The anemic performance raised questions in late 2023 over what was actually happening. Was this a bear market rally or the beginning of a bull market?
Most indicators pointed to a strong recovery from high inflation. However, many economists continued to predict that a recession was just around the corner, primarily spurred by rising bond yields caused by the Federal Reserve Board’s interest rate hikes. Typically, higher bond yields cause investors to move money from equities into fixed-income opportunities.
The answer is fairly simple: No one can be 100% certain about the existence of a bear market rally or the beginning of a bull market until after the fact.
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