The main averages on Wall Street are recovering this week, hitting their highest in more than a month on Wednesday as tech shares rallied. It has been said that the bulls are returning to the market, with the company’s earnings in the early sessions largely holding. But strategists at Goldman Sachs and elsewhere this week said they don’t believe the bear market has bottomed out, amid recession fears and heated inflation. Earnings A key factor in determining the bottom is earnings, according to Sharon Bell, senior European equities strategist at Goldman Sachs. “We don’t see this bear market over yet,” she told CNBC’s “Squawk Box Europe” on Tuesday. “I think we still haven’t really seen earnings estimates fall… margins are still pretty high.” She added that valuations, particularly in Europe, are “certainly not at the bottom you usually see in bear markets, so yeah, I think there are risks to the downside.” Bell says the first half of the year is “pretty good,” with reasonably strong economic growth and even with high inflation, companies have managed to weather some additional price hikes, she said. more. “But I think it’s going to be harder to get to consumers and we’re expecting a squeeze in margins,” Bell said. Analysts are predicting earnings per share of $226.92 by the end of the year, or one-year growth of 10.05% and $246 by the end of 2023, or 8.69%. according to FactSet. In a recession scenario, those numbers could be even worse. In Europe, earnings have fallen about 20% to 30% in an average recession, while the average has fallen about 14% for the S&P 500 over the past eight recessions, according to Bell. She said profit and earnings estimates will drop from here. “So yes, I think there is still [risks] On the downside,” says Bell. We have to go a little further.” Inflation The second factor in determining whether a bear market has bottomed out is peak inflation, according to Goldman. In a June 14 report, Bell noted. Note that headline inflation has peaked above 3% in the US 13 times since 1950 – and that the S&P 500 often falls during those peaks and recovers on average after peaking.” – Strong rallies benefit from at least one of three factors: a sharp slowdown in economic growth, undervaluation, and falling rates,” wrote Bell. In the UK, it could peak in October. US inflation rose 9.1% in June from a year ago, higher than estimates and marking the fastest pace since November last year. 1981. What the Fed does important Wolfe Research expects this bear market rally to be short-lived, saying its bearish base case remains intact. recently As investor sentiment (which is a contrarian indicator) hits its lows, this could give stocks a strong near-term rally,” it said in a note Wednesday. In a separate note on Tuesday, Wolfe Research analysts said trading is “likely to remain highly variable,” with more bear market rallies in the coming months. The researcher does not see stocks bottoming out in the medium term until investors gain a better understanding of future moves from the US Federal Reserve. The company said it believes the Fed has two basic options: tighten policy aggressively and spark a deep recession to “crush” inflation, or tighten moderately and trigger a recession. lighter without solving the problem of inflation. Most analysts now expect the Fed to raise rates by three-quarters of a point this month — not a full percentage point as was suggested by some last week.