There's no doubt that 2022 marks the 3rd bear market of this century. However, there is one stark difference between this episode and the bear markets from 2000 to 2002 and 2007 to 2009.

This is the absence of meaningful, bear market rallies that tend to average between 15% and 30%. They often unwind sharp losses, turn sentiment from excessively fearful to greedy, punish shorts who are late to the party, and convince some portion of market participants that the bear market is over.

In hindsight, these advances only serve to 'reset' the market and create the stage for the next move lower especially as fundamentals remain bearish.

So, while 2022 has been a textbook, bear market by most measures, there has been an absence of meaningful, counter-trend moves. But, this could be changing. Here are 3 reasons that a bear market rally could be imminent:

Longer-Term Treasuries Finding a Bid

This is the first ingredient in any market recovery and is the likely culprit for why the first half of 2022 was so brutal for investors. Soaring inflation and a hawkish Fed resulted in multiple compression that wasn't enough to overcome modest earnings growth.

Now, multiples should inflate as long as longer-term rates continue to decline along with rising recession risk.

Extreme Bearish Sentiment

Fund manager and investor surveys are showing extremely low levels of allocation to equities. This means that conditions are ripe for a countertrend move especially if there is any good news.

Another indication of excess bearish sentiment is that we have an all-time high in the number of investors who are expecting a recession. Historically, buying at such extremes tends to work out in the intermediate and longer term.

Inflation Rolling Over

Only those who have experience in previous market cycles understand that inflation has already inflected over. Think about a car, traveling at a fast speed, and then the driver slams on the brakes. There is an interim period where momentum takes the car forward, possibly for quite some time.

With housing in contraction, the ISM now negative, and commodity prices turning lower, it's inevitable that inflation will follow which will provide a positive tailwind to the market.