A bear market rally is what it sounds like — a little rally in stocks that happens during a broader period of time that reflects a bear market. We’ve been having a few bear market rallies in 2020.
Let’s just get a quick check on what a bear market is before we go any further.
A bear market is when stocks fall 20% or more from their all-time-highs.
The Coronavirus has caused an economic stoppage that prompted a bear market with serious, in which the S&P 500 fell 34% from its all-time-high hit in mid-February. The 2020 low, so far, was in mid-to-late March.
Since March 23, stocks have rallied by more than 20%, as investors have now priced in the expected outcome of the virus gong away sometime in 2020 an economic recovery from what likely is a first half 2020 recession. Stocks are less than 20% below their all-time-highs, as they’ve left bear market territory.
There are still risks out there, causing some risk-off sentiment in the market. If stocks fall below that level again — where they’re more than 20% below their all-time highs, we will have had two bear market rallies.