What is a Tortoise Rally

A tortoise rally occurs when there is a slow-and-steady appreciation of financial market prices over time.

Breaking Down Tortoise Rally

A tortoise rally is a kind of rally, or an upward swing in the markets. During a rally, there is a sustained increase in the prices of stocks, bonds or indexes. Typically, a rally comes after a period of stable or declining prices.  

Tortoise rallies are generally beneficial for long-term retail investors who employ a buy-and-hold strategy because they enjoy the steady gains that it produces.

However, tortoise rallies can be frustrating for active traders and hedge funds, for whom volatility creates opportunities to buy under-priced securities for the long haul or to create short-term trading profits. Generally, they capitalize on their superior information and market access, but the lack of quick drops and rises in a tortoise rally prevents them from benefiting from this.

In general, the length of time of a rally can vary for different types of investors. For example, for a day trader, a rally might refer to thirty minutes of the trading day. But to a portfolio manager for a large retirement fund who is looking at the bigger picture, a rally might be one quarter of a year. 

Unlike in tortoise rallies during which prices steadily increase, in more volatile rallies, prices rise and fall quickly while maintaining a general upward trend.

Other Types of Rallies

In a relief rally, for example, prices increase because expected negative news does not happen or is less severe than originally anticipated. Some of the reasons that can cause relief rallies include poor economic data, corporate earnings or political outcomes. Relief rallies can happen in the stock market, bond market, with commodities such as oil and others.

Another type of rally is a bear market rally. In this situation, there is a temporary increase in the price of stocks during a bear market. But the rise in prices is temporary amid an ongoing downward trend in the market. For example, after the stock market crash of 1929, there was a brief increase in prices, or a bear market rally, which was followed by a bigger crash.

The causes of different kinds of rallies can be different. For example, a long-term rally is typically a result of events that have a longer-term impact, such as changes in fiscal policy or taxes. However, a short-term rally could be caused by a news event that results in a short-term imbalances in supply and demand.