Real Bull Market or Just a Bear Rally? Depends Whom You Ask

Now that the stock market technically has crossed into bull territory, achieving a 20% gain last week from its Oct. 12 low, experts disagree on whether equities have hit a true bull market.

Even strategists at major investment firms have opposing takes, with Goldman Sachs expecting the rally to broaden and Morgan Stanley warning the bear market really isn’t over.

The stock market Rorschach test played out Friday on CNBC’s “Halftime Report,” where other investment strategists gave differing answers to host Scott Wapner’s question on whether the exit, technically, from the longest bear market since 1948 really constituted a bull market.

Joe Terranova, chief market strategist at Virtus Investment Partners, appeared to land on the no side, suggesting the market entered bull territory technically but not fundamentally. The bond market wasn’t confirming a bull market, he said.

“There’s this divergence from what we’re seeing reflected in the equity market and what we’re seeing in the bond market,” where yields are up, Terranova said. “We’re void of significant growth, that’s for sure; we’re still in an earnings recession.”

He called the rally concentrated in tech stocks, and the gain “a nice milestone. That’s all it is.”

Stephanie Link, chief investment strategist at Hightower Advisors, answered the bull market question with a “maybe.”

Parts of the markets, such a tech, communication services and discretionary, “are in a bull market,” she said, adding that tech and communication services account for 35% of the S&P 500.

“The rest of the market is struggling,” said Link. “Because the economy is actually doing a little bit better, I think eventually we are going to see a broadening out and the laggards will catch up.”

That’s especially so if the economy and markets are in “the ninth inning” with Federal Reserve rate hikes, she suggested, noting also that inflation is declining and earnings have held in and posted better than expected.

Link added, however, that she doesn’t know if it’s a “huge bull market” because there are alternatives in fixed income and international investments.

Bill Baruch, Blue Line Capital founder, suggested his firm has positioned itself for a bull market for three months.

“Do you really want to be buying stocks and really loading into stocks when it’s finally officially a bull market?” he asked the CNBC panel. When his firm started seeing “divergences” in March, it embraced the “2019 playbook” and said tech stocks would lead the market out of bear territory, he said.

“In our mindset it’s been a bull market,” Baruch said. The small-cap Russell 2000 was up about 6.5% since the previous week, he noted.

“You’re getting the breadth, you’re getting other parts of this market to start to join,” Baruch said. The Russell 2000 breaking out of the hole turns on the green light for other parts of the market, and Blue Line has been “rotating a bit,” he added.

Baruch added that S&P futures need to close above 4,300 to 4,330 on a weekly basis, and have not done that yet.

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