The stock market's growth as it bounces off the June lows is nearing a magnitude that precedes huge moves in the past. The dilemma for investors is that they can be in any direction, according to analysts at Jefferies.
The S&P 500 SPX has bounced more than 13% off its 2022 closing low of 3,666 through Friday. 77, set on June 16. The Dow Jones Industrial Average DJIA, which had fallen more than 20% from its Jan. 3 record close, remains in a bear market, despite the S&P 500 being in a bear market, the Dow Jones Industrial Average DJIA was on track Monday to exit a market correction if it finishes above 32,877. The Nasdaq Composite COMP had briefly traded above the threshold, while the Nasdaq Composite COMP had traded above the threshold — 12,775. It would exit from a brutal bear market when it reached 32.
The U.S. stock rally looks more like a new bull market than a bear bounce, wrote Jefferies strategists, including Andrew Greenebaum, in a Sunday note. A rise of just over 8% over four weeks would be a two-standard deviation for S&P 500 rallies, they observed, based on data going back to 1990, which means the market won't need much more juice to hit statistically significant territory. The S&P 500 has hit that threshold 17 times, the subsequent performance looks massive, they wrote, averaging 9% over the next six months. There was a caveat that there were also several instances that saw double-digit negative returns. They wrote that while the seemingly unstoppable bounce may lure folks in, there is a strong chance that it is just a fairly tradeable bear market rally when the previous six months were negative, as would be the case this time around.