Don't Stop Worrying

The S&P 500 has climbed up from the bottom, but a scary earnings season looms

- By Michael P. Regan

Is this a bear market or a bull market? It’s a strange question to ask just weeks after a 34% decline in the S&P, but here we are. The surge in the S&P 500 from its low on March 23 exceeded the 20% threshold many say defines the start of a bull market, even if the record high on Feb. 19 remains a distant memory. Like everyone stuck at home for the past few weeks lamenting that they aren’t sure what day it is, investors are finding the Covid-19 pandemic disorienting. No one seems 100% sure what type of market environment this is.

Bear markets are famous for including stunning rallies that turn out to be short-lived. The financial crisis had a few such upswings, including a 24% surge from late November 2008 to early January 2009, before the final low was set in March. Underpinning the current confusion is an unprecedented series of interventions from the Federal Reserve, combined with a still-fuzzy picture of just how long the virus will wreak havoc on the economy and corporate profits. The picture may begin to clear as companies start reporting results for the first quarter and offering guidance about what to expect for the rest of the year.