- The stock market rallied Wednesday, the second trading session this week to interrupt the frantic selloff that begin mid-February.
- But that doesn’t mean the selloff is over. A legendary economist and global strategist says this is exactly what happened in the 2008-09 bear market.
- In fact, bear markets are more prone to outlandish, one-day surges in stock prices. This week’s whiplash rallies indicate the bull run is over.
The stock market rallied Wednesday as markets warmed up to the Federal Reserve’s emergency interest rate cut of half a percentage point. The Fed cut interest rates from the 1.50%–1.75% range to the 1%–1.25% range.
By cutting interest rates, which are essentially the price banks charge to lend money from each other, the Fed made it cheaper for businesses and individuals to borrow.
Markets usually react to that news with more confidence and buy stocks, driving up their prices. But it temporarily spooked an already nervous stock market Tuesday.
Stock Market Charts Exuberant One Day Rallies
The swiftest stock market correction in history began as the coronavirus outbreak spun out into a global pandemic. The emergency interest rate cut was a confirmation of investors’ worst fears by authorities at the central bank and US government.
Past emergency rate cuts have had a similar effect on the stock market. But Wall Street erupted with buy orders Wednesday. The Dow Jones Industrial Average nearly surged as much as it did on Monday when it posted a 5.1% gain.
On Monday and Wednesday this week, all three major stock market benchmarks bounced hard. The Dow Jones, S&P 500 Index and NASDAQ Composite posted gains in the 4%-5% territory during these trading sessions.
But that doesn’t mean the sell off is over. In fact, it could indicate the bear market is just getting started. That’s according to famed economist and global investment…