The US stock market has reached a new high, but historical trends suggest potential for correction.
The recent surge in the US stock market has broken records, with the Nasdaq closing 12% higher on Wednesday, marking its second-largest gain in history. The S&P 500 also climbed nearly 10%, recording its third-largest single-day gain. ‘Strategy (MSTR), one of the fastest-recovering stocks and a component of the Invesco QQQ Trust, Series 1 (QQQ) ETF, surged 25%.’
The NASDAQ, short for National Association of Securities Dealers Automated Quotations, is a global electronic marketplace for buying and selling securities.
Founded in 1971 by the National Association of Securities Dealers (NASD), it is now a leading stock exchange globally, hosting more than 3,000 companies.
The NASDAQ Composite Index tracks the performance of all stocks listed on the exchange, making it a widely followed benchmark.
While this may seem bullish on the surface, it’s worth noting that the Nasdaq‘s three biggest rallies occurred in 2001 and 2008—both during recessions and followed by new lows. Similarly, the S&P 500‘s two larger green days were also during the 2008 financial crisis. ‘Investors should be aware of bear market rallies.’
A bear market is a prolonged period of declining stock prices, typically defined as a decline of 20% or more from recent highs.
This downturn can be caused by various factors, including economic recession, inflation, or global events.
During a bear market, investor confidence wanes, and selling pressure increases, leading to further price declines.
Historically, bear markets have lasted anywhere from several months to over two years, with the 2007-2009 market crash being one of the most significant examples.
Globally, rising bond yields were rattling markets. According to ‘FOX Business Senior Correspondent Charles Gasparino,’ the pressure in the bond market may have stemmed from Japan selling bonds—not China, as many had assumed. The VIX (Volatility Index) closed at 34, registering the largest one-day percentage drop in its history, surpassing the 2010 record.
Bitcoin also saw a spike, briefly rallying above $82,000. However, it remains within the downward channel it has followed since January.
