us stocks have clawed back much of their losses from the first half of the year but the three major indexes tumbed this week under reviving fears about interest rate rises by the federal reserve and there are signs that the bulk of the bearmarket rally is already behind us said citigroup’s analysts according to strategists at citi research the current bear market rally is almost in line with the length of an average bearmarket bounce and sentiment has already improved as much as it typically does during regular bear market rallies which would suggest a possible end to the rally relatively soon “bear market rallies are often sentiment driven as the market just becomes too bearish” wrote citi research strategists led by dirk willer the managing director and head of emerging market strategy in a note on thursday “more fundamentally many bear market rallies are driven by hopes that the fed comes to the rescue the current one is no different as the fed pivot narrative has been an important catalyst” in particular the chart below shows that the aaii bullbear indicator one of the closelywatched investor sentiment surveys is almost back to levels where bear market rallies peak out with expectations that stock prices will rise over the next six months increasing 12 percentage points to 333 in the week of august 15 while the bearish sentiment increased 05 percentage points to 372 meanwhile the skew index for the sp 500 which measures the difference between the cost of derivatives that protect against market drops and the right to benefit from a rally normalized almost as much as it does in the median bear market rally see chart below said citi research the index can be a proxy for investor sentiment and volatility federal reserve officials in july agreed that it was necessary to move their benchmark interest rate high enough to slow the economy to combat high inflation while raising concerns that they may tighten the stance of monetary policy by more than necessary according to minutes of the federal open market committee’s july 2627 meeting released wednesday see powell to tell jackson hole that recession won’t stop fed’s fight against high inflation after the release of minutes of the meeting the federal reserve bank of st louis president james bullard said he is leaning toward another large rate rise of 75 basis points at the central bank’s september meeting meanwhile richmond fed president tom barkin said the fed “will do what it takes” to drive inflation back toward its 2 target according to a bloomberg report while reuters reported that barkin saying the fed’s efforts needn’t be “calamitous” see stop misreading the fed it’s not getting cold feet about wrestling inflation to the ground according to citi research the bear market rally refers to a bounce equal to or larger than 10 that takes place between the peak and the trough “if a new low is made after a 10 rally the next rally of more than 10 is a separate bear market rally or a bull market if no new lows are made subsequently” wrote strategists the sp 500 spx was up 154 from its 52week low of 366677 on june 16 while the dow jones industrial average djia rallied 129 and the nasdaq composite comp jumped 194 since their midjune lows according to dow jones market data in total citigroup noted three indexes have experienced a 17 rally in the past 42 trading days since june 16 us stocks traded lower on friday the dow jones industrial average djia fell 33947 points or 10 to 3369557 the sp 500 spx dropped 6036 points or 14 to 422338 the nasdaq composite comp decreased 27242 points or 21 to 1269292