Bear Market Rallies
March 24, 2009 update
The financial press was quick to point out that the 21.6% S&P 500 rally since March 9th was the fastest two-week advance since 1938. Is this a useful indicator? A sufficient cause for hope?
A look at market history teaches us that bear market rallies are quite unpredictable. The savage 1973-1974 bear had two rallies of approximately 10%. The 2000-2002 bear had three substantial rallies (19%, 21.4%, and 20.7%). The current bear has had four double-digit rallies (12%, 18.5%, 24.6% and the recent 21.6%).
But the Grandpa bear Dow crash of 1929-1932 had a total of five 20%-plus rallies over the course if its 34-month decline of 89.2%. The first was a massive 48% rally. The last rally of 24.6% was followed by a final decline of 53.6%.
We're all hopeful that the latest rally will prove to be the beginning of a new bull market. But history suggests we proceed with caution in our financial planning.
Footnote: The current bear market is in the middle of its 17th month. At the equivalent point in the 34-month crash of 1929, the market was nearing the end of the second of its five bear market rallies.
Bear Turns to Bull?
March 24, 2009 updated each market day
The S&P 500 remains well above its low of March 9th. Is this a bona fide bull market or just another bear rally? Click here to review the previous rallies during the current bear market.
We continue to be fascinated with the saga of the Four Bad Bears. In nominal terms, the latest rally puts the S&P 500 just slightly higher than Dow Crash of 1929 over the equivalent time frame. In real (inflation adjusted) terms, the Dow fares better.
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