It All Depends on Your Starting Point

"An old saying is that in a bull market, your time horizons grow longer and longer. In a bear market, they grow shorter and shorter." -Tom Gayner

As much as we discuss various price levels and moving average reference points on the major indices, the fact remains that bulls view this abrupt rally the last two sessions as part an parcel of a meaningful market bottom, while bears see it as a classic bear market rally doomed to fail. 

The bear case has historical merit, since virtually all indices and major tech leaders are trading below declining 200-day moving averages now, the essence of the bear.

Further, the recent trade war headlines spawned an exuberant rally, indeed, full of vicious short squeezes. But anyone who has traded a major bear market before knows that bear markets rarely, actually, bottom on headlines. No, major bear markets typically end when you can hear a pin drop on virtual and actual trading floors after months on end of failed rallies and tedious moves to new lows. 

Of course, what makes the above analysis murky are the recent market cycles where epic liquidity interventions by both the Fed and Treasury have seemingly superseded bear market arguments and immediately rectified any technical damage whatsoever. 

But so far we have neither of those, with Fed Chair Powell on hold and Treasury Secretary Bessent still hoping for lower rates on the long end of the curve. 

Seeing a stock like Tesla rally sharply despite its horrendous earnings miss does indeed happen during bear markets, adding to the randomness of the action. Here, again, one must distinguish between "a' short-term bottom versus a major bottom. 

With rates on the 10-Year Note a full one hundred basis points off the morning lows, however, we are far from out of the woods on inflation/stagflation.

For much of the time since the 2008 crisis we have seen a win-win situation for The Fed and Treasury: They could add liquidity and ease at will, since inflation was not yet present but we were also in a post-crisis world. 

Now, though, it is worth considering if we are in a lose-lose world for those same institutions (seeing as Powell is starting to acknowledge he is trapped): Trade deals or not, rates on the long end of the curve may be destined to go higher anyway and cause a ripple effect of bearish outcomes across asset classes.