{"id":6272,"date":"2025-04-09T20:10:14","date_gmt":"2025-04-09T20:10:14","guid":{"rendered":"https:\/\/www.europesays.com\/uk\/6272\/"},"modified":"2025-04-09T20:10:14","modified_gmt":"2025-04-09T20:10:14","slug":"stock-market-outlook-lessons-from-bear-markets-as-stocks-see-wild-swings","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/uk\/6272\/","title":{"rendered":"Stock Market Outlook: Lessons From Bear Markets As Stocks See Wild Swings"},"content":{"rendered":"

The S&P 500<\/a> briefly entered a bear market<\/a> on Monday, falling 21% from its mid-February peak.<\/p>\n

The uncertainty surrounding President Donald Trump’s tariffs,<\/a> which were higher than Wall Street expected, plunged the market into chaos over the past week.<\/p>\n

An increase in market volatility has strategists at Goldman Sachs dusting off their bear market playbook and examining the various paths stocks can take based on historical trends.<\/p>\n

Here’s what to expect if the stock market decisively enters bear market territory.<\/p>\n

There are 3 types of bear markets<\/p>\n

Bear markets can fall into three categories: structural, cyclical, and event-driven.<\/p>\n

Goldman said the market is currently flirting with an event-driven bear market, given that tariffs were the key catalyst to spark the recent plunge, with the S&P 500 dropping 10% right after Trump announced his tariff list.<\/p>\n

“This could be seen as self-inflicted, given the strong prospects for global economic activity at the start of the year, particularly in the US, where our economists put the probability of recession at just 15%,” Goldman Sachs said.<\/p>\n

Betting markets and various economists now predict the odds of a recession hitting the US economy this year have risen past 50%.<\/p>\n

Furthermore, Goldman said that an event-driven bear market could easily turn into a cyclical bear market if the economy materially slows down.<\/p>\n

How deep could the sell-off go?<\/p>\n

If the S&P 500 closes down 20% from its peak and officially triggers a bear market, there could be more pain ahead.<\/p>\n

The bank said the average event-driven and cyclical bear market experiences a decline of about 30%.<\/p>\n

“On that basis, we would expect further downside,” Goldman Sachs said. “Very low unemployment (which is likely to rise) and elevated valuation suggests that markets are still vulnerable to the downside.”<\/p>\n

A peak-to-trough decline of 30% would send the S&P 500 to about 4,300, or about 18% lower than current levels.<\/p>\n

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Goldman Sachs<\/p>\n

How long could a bear market last?<\/p>\n

If an event-driven bear market strikes, the decline and eventual rebound could be quick.<\/p>\n

Goldman said that this type of stock market decline tends to last about eight months, with a full recovery seen in about a year.<\/p>\n

But if this event-driven shock to the stock market transforms into a cyclical bear market, it could last a lot longer; the decline could last about two years, and it would take five years to fully rebound, according to Goldman.<\/p>\n

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Goldman Sachs<\/p>\n

Don’t be fooled by bear market rallies<\/p>\n

Some of the strongest rallies in the stock market have historically occurred during bear market sell-offs.<\/p>\n

That’s potentially what happened Tuesday, with the S&P 500 surging 4%<\/a> after its brutal three-day sell-off.<\/p>\n

“Given the very sharp falls in investor sentiment over the past few days, it would be typical for there to be a bounce in equity prices,” Goldman Sachs said.<\/p>\n

Strong bear market rallies are driven by light investor positioning, meaning it only takes a little bit of buying, combined with little selling, to drive markets a lot higher on a given day.<\/p>\n

Ultimately, bear market rallies could last weeks before continuing their downtrend to new lows, with the average bear market rally lasting 44 days and returning 13%.<\/p>\n

The 4 ingredients for a recovery<\/p>\n

For a bear market in stocks to fully recover and transition into a bull market, four conditions need to materialize.<\/p>\n

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