S&P 500 Surges 11.6% as Trump Halts Tariffs, Crypto Follows

On Wednesday, the S&P 500 equities benchmark experienced a significant climb, marking the most substantial gain since 2008. This rally was accompanied by notable increases in bitcoin (BTC) and the broader crypto market, as indicated by the CoinDesk 20 (CD20) index. The market turnaround was sparked by President Donald Trump's announcement of a 90-day pause on tariffs, which fueled optimism on social media about an imminent prolonged bull run in both stocks and crypto.

However, analysts at Goldman Sachs and other institutions caution against overoptimism. They point out that multiweek, double-digit equity price rallies are quite common even during larger bear markets. According to Goldman’s strategy team led by Peter Oppenheimer, bear market rallies are quite common due to light positioning, where marginal changes in variables can have amplified effects on markets. The team noted that there have been 19 global bear market rallies since the 1980s, with an average duration of 44 days and returns ranging from 10% to 15% for the MSCI AC World index.

Historical data supports this perspective. For instance, one of the worst bear markets in history, which occurred during the 1930s, saw about half a dozen major double-digit rallies before the market fully recovered. This historical context suggests that the recent 90-day bounce could be a bear market rally rather than the start of a new bull run.

Several factors indicate that the recent rally may not be sustainable. According to Goldman Sachs, characteristics of a sustained bottom, such as attractive valuations, extreme negative positioning, policy intervention, and a slowdown in macroeconomic deterioration, are not yet evident. The Federal Reserve is unlikely to offer support in the near future, and while Trump has halted tariffs for 90 days, trade tensions could escalate again. Additionally, tariffs on China continue to rise, and stocks are not yet considered cheap.