Markets at an Inflection Point

Key Takeaways

1. The stock market appears to have transitioned into a bear market
2. Volatility in gold prices, but the uptrend remains intact
3. Bitcoin’s price is surprisingly resilient as the stock market declines

Quick Recap: Last Week

Last week, the Pulse newsletter was written in a rather cautious mood. The S&P 500 index was beginning to approach a threshold where the market's trajectory would start to look like an outright bear market rather than just a correction.

At the time, we summarized our analysis into three points:

• The S&P 500 index's downtrend continues, significant watershed levels are approaching
• Interesting opportunities in individual themes
• The crypto market is surprisingly stable

Last week, we wrote that the equity markets were on a downtrend and that the S&P 500 index was approaching significant watershed marks.

We wrote then:

“Currently, it is clear that:

1. The stock market's momentum is downwards.
2. Breaking below the 6,550-point level would confirm the interpretation of a transition into a bear market.
3. Our baseline assumption is that we will see this drop below 6,550 points, but we still want to see the market validate our expectations."

A week later, we can note that the stock market's downtrend has continued, and, as we expected, the S&P 500 index broke below both its 200-day moving average and the 6,550-point mark.

With these milestones breached, it is increasingly difficult to interpret the state of the stock market as a mere correction; rather, it looks like the beginning of a cyclical bear market.

In our view, the transition to a bear market has some clear implications for the investor.

In a bull market, stock indices typically move upwards slowly but steadily, and downwards rapidly but briefly. Because of this, one shouldn't be spooked by sharp downward movements in an uptrend, as they mostly represent just a momentary "clearance sale." Downward moves start quickly, but they also end quickly when optimistic investors begin to "buy the dip."

In a bear market, this dynamic often reverses. The downward movement is often slow but continuous, whereas upward movements are sharp but short-lived. Rallies can look very promising but end abruptly when investors looking for an exit view the price surge as a good selling opportunity.

Such fierce but abruptly ending bear market rallies can cause problems for an investor who hasn't calibrated their thinking to a bear market mentality.

As long as our interpretation remains that we are entering a bear market, we will follow these rules of thumb:

• All upward movements in the indices are seen primarily as selling opportunities, not buying opportunities.
  
• If one wants to try buying at the index level, it should be done on big down days, not up days. Strong down days (e.g., when the S&P 500 falls more than 2%), preferably with high volume, might be buying opportunities worth testing. One of these big down days might turn out to be the absolute bottom of the bear market.
  
• More important than "bottom fishing," however, is to keep in mind that even in a bear market, some segments of the stock market move upwards. If one wishes to hold equities in their portfolio during a bear market, it often makes sense to concentrate purchases in stronger sectors rather than at the broad index level.

These rules of thumb apply as long as we assess that we are in a bear market. When would we then change this interpretation?

Currently, we are setting the watershed at the 6,720-point level. This is the level at which the S&P 500 index closed on Tuesday, March 17, 2026, following a strong bounce. If we were to see this level surpassed, we would consider it appropriate to open the door to the possibility that we have transitioned back into a bull market.

This week, the S&P 500 index has climbed nearly 1.5%, which has sparked hopes among some investors that the bottom is behind us. However, we are still about two percent away from our stated milestone, meaning we aren't even halfway there yet.

This illustrates the challenging nature of bear market rallies. Stock indices can rise for several days, even weeks, and climb by several percent, luring investors into a rally that then fades just as quickly as it began.

With stock indices on a downtrend, however, we see interesting opportunities in individual sectors.

For example, the price of the VanEck Space Innovators ETF (JEDI) has already climbed higher than its level at the start of the Middle East conflict and has also surpassed its all-time high seen in January.

Space technology is one of the most important sectors of the coming decades, and it seems that the impact of the Middle East conflict and the broader stock market downtrend on it has remained quite minimal.

Alongside space technology, another theme looking strong is the chemical industry. Many chemical companies are benefiting in various ways from the Middle East conflict and disruptions to shipping in the Strait of Hormuz, which affect supply chains for things like fertilizers and various plastic compounds.

The stock price of chemical giant Dow Chemical Company (DOW) has continued its strong ascent in recent days.

If our hypothesis regarding the beginning of a bear market proves correct, it means that in the near future, investors will be rewarded more clearly than before for active portfolio management and asset selection, rather than a buy-and-hold strategy and index investing.

Wherever the stock markets go, we will continue to monitor the situation and keep you up to date!

Volatility in the Gold Price

During early 2026, the price of gold has delivered both sharp rises and falls. Over the past week, we saw the latter as the price of gold briefly touched its 200-day moving average.

This was the second time in 2026 that the price of gold fluctuated by nearly 10% in a single day.

However, one should be careful not to draw overly strong conclusions from such intraday volatility. Neither of the sudden drops early this year has managed to break its two-year uptrend.

Our interpretation is that it is exactly this uptrend that has brought more short-term speculators into the gold market than before. When the general sentiment of the investment markets turned heavily risk-averse, these speculators unwound their positions, either voluntarily or forced by margin calls.

The flushing out of elevated speculation from the market is often only a positive thing for long-term development. We consider it most likely that the vast majority of the "air" accumulated in the short term has now been squeezed out of gold's price.

Even though the price of gold is roughly at the same level as at the beginning of 2026, its upside potential looks at least as attractive now, after these probable forced sales, as it did at the turn of the year. As long as the price of gold stays above the local bottom of October 2025 (around $3,900), our expectation for its long-term price development remains clearly positive.

Bitcoin on an Uptrend?

One of the most interesting phenomena in the investment markets in recent weeks has been the stability of the largest cryptocurrency, Bitcoin, amidst the market's general "risk-off" mood.

Since the beginning of February, Bitcoin's price has been making higher lows, and the start of the Middle East conflict is hardly visible in its price action.

However, we try to be cautious about drawing conclusions that go too far. It is worth keeping in mind that before this strengthening, the crypto market turned downwards clearly before the stock market did. Cryptocurrency prices fell sharply in late 2025 while the stock market was still chugging upwards.

It may therefore be that investors had already reduced their risk in the crypto market so much earlier that the start of the Middle East conflict no longer triggered a need for additional selling.

If we compare the price of Bitcoin (using the BTC ETF fund IBIT as a reference) to the S&P 500 index, we can see that this ratio has crossed above its 20-day moving average, but remains below all other key moving averages.

It might therefore be a bit premature to declare that Bitcoin has outright started to strengthen against the stock market. However, larger trends always begin with small steps, so we will watch with interest to see how far the relative strength Bitcoin's price has shown so far will carry it.

Investing year 2026 continues to be quite eventful.l. Right now, it looks like it's shaping up to be a year that, above all, rewards active portfolio management, careful asset selection, and risk management. We will continue to monitor the situation and get back to you in two weeks, so stay tuned!