WOW! The S&P 500 Index is on fire, soaring 20% since last October! Despite all the gloomy headlines about debt ceilings, banking crises, inflation worries, and even wars, the market has defied all odds.
Is this the start of a new bull market, because a 20% rally usually means so? Or just a temporary bounce in an uncertain economy? History tells us that post-bear market rallies like this aren't uncommon, so we should tread carefully.
Check out the chart below for two previous instances of similar rallies and how the market responded afterward. It serves as a good reminder for investors to stay disciplined in their investment process. After all, the market has been and always will be unpredictable. So proper risk management (such as managing drawdown risk) and diversification will help investors achieve their financial goals.