The stock market rose for the past three days in a row through Thursday, with the Dow Jones industrial average up 21% over that time. The bounce led many investors to herald the beginning of the next bull market—just a little more than two weeks after we officially entered a bear market.
That would make the coronavirus-induced bear market the shortest bear market on record—if it were indeed really over. The reality is more complicated.
While a bear market is defined as a fall of more than 20% from the stock market peak, a bull market must not only rise that much, but also sustain that gain before falling further.
As Sam Stovall, chief investment strategist for markets research firm CFRA, explains, “I define a bull market as a 20% advance off of the prior low that does not get undercut within six months”—with emphasis on that latter point. In other words, this “bull market” counts only if stocks get to late September without going lower than they were on Monday. “So I wouldn’t be too quick to say we are in a new bull market,” Stovall adds.
Historically, it’s not so unusual for stocks to plunge into a bear market only to bounce more than 20% shortly thereafter. What is unusual is for bear markets to end there.
For example, during the financial crisis of 2008, the S&P 500 rallied more than 20% off its November lows in early December—only to catch another downdraft in February, ultimately bottoming in March 2009.
Excluding the one that occurred this month, the shortest bear market for the Dow was in 1998, and lasted 45 days. The shortest bear for the S&P 500 was in 1990, lasting less than three months.
This time around, the Dow fell from its Feb. 12 high of 29,551.42 to 18,591.93 on Monday, March 23, a drop of 37%. The S&P 500 declined from a peak of 3,386.15 on Feb. 19 to 2,237.40 on Monday, down 34%.
Like the Dow, the S&P 500 also rose the last three days, to 2,630.07, but its 17.6% rise stopped short of putting it back into a bull market. It needs to gain less than 55 points to reach 2,684.88 in order to complete the 20% bounce to see bull territory again.
Of course, even a 20% bounce off lows doesn’t mean much when the market still has a long way to go to recover its overall losses. The Dow, at Thursday’s closing level of 22,552.17, remains nearly 24% below its peak, while the S&P 500 is more than 22% off its high on Feb. 19.
Tentatively bullish investors will be watching the market to see that not only does it not fall further than this week’s Monday lows, but whether it can recover its old highs.
If the last market crash is any guide, when the bear market did finally end in 2009, it was the “quickest recovery” for stocks since World War II, according to Stovall—with the S&P 500 taking just two weeks to surge 20%. The rally of recent days could beat that record—but that’s only if the bear doesn’t come back in the next six months. Alas, stocks were sharply down again in early trading Friday morning.
More must-read stories from Fortune:
—Everything you need to know about the coronavirus stimulus checks
—The quickest way to boost the economy isn’t even being considered. Why?
—How does America pay for the coronavirus relief bill? With two shiny coins
—Will the “Great Cessation” be worse than the Great Recession?
—Listen to Leadership Next, a Fortune podcast examining the evolving role of CEO
—WATCH: U.S. tax deadline moved from April 15 to July 15
Subscribe to Fortune’s Bull Sheet for no-nonsense finance news and analysis daily.
