As major stock indices dip into bear market territory or near the 20% decline threshold, Goldman Sachs has offered insight into the current market conditions. The financial institution highlighted that not all bear markets are the same, distinguishing between structural, cyclical, and event-driven bear markets.

Goldman Sachs outlined that the current downturn is an event-driven bear market, triggered by “liberation day” and rising tariffs. 

“We argue that we are currently in an event-driven bear market. The event in this case was ‘liberation day’ and the sharp rise in tariffs it triggered… However, it could easily morph into a cyclical bear market given the growing recession risk,” the firm stated.

Goldman Sachs explained that while both event-driven and cyclical bear markets typically see declines of around 30%, event-driven downturns tend to be shorter with quicker recoveries.

“On that basis, we would expect further downside,” Goldman Sachs went on to add.

Furthermore, the recent market rally being observed on Tuesday might be a sign of a temporary bear market bounce, as “bear market rallies are quite common” the investment bank said.

On Tuesday the Dow (DJI), S&P 500 (SP500), and the Nasdaq Composite (COMP:IND) were all higher by at least 3% at one point.

Market Tracking ETFs: (NYSEARCA:DIA), (NYSEARCA:DDM), (NYSEARCA:DOG), (NYSEARCA:DXD), (NYSEARCA:SDOW), (NYSEARCA:SPY), (NYSEARCA:VOO), (NYSEARCA:IVV), (NYSEARCA:RSP), (NYSEARCA:SSO), (NYSEARCA:UPRO), (NYSEARCA:SH), (NYSEARCA:SDS), (NYSEARCA:SPXU), (NASDAQ:QQQ), (NASDAQ:QQQM), (NYSEARCA:QLD), (NASDAQ:TQQQ), (NYSEARCA:QID), and (NASDAQ:SQQQ).