Displaying items by tag: bear market

(New York)

Advisors large and small need to worry about this next bear market, as the latter may not survive, according to Barron’s. The reality is that there are many small RIAs who have kept their business alive because of the long bull market. However, “The smaller you are, the more vulnerable you are, because if the market goes down 15%, it gets harder and harder to run a business”, says Fidelity’s clearing division. Margins are already quite slim for small RIAs and lower AUM from market losses would likely kill many businesses. “When the stock market drops, revenues drop, and no expenses immediately come out of the system”.

FINSUM: The big question is whether RIAs who feel vulnerable should perhaps try to sell to larger players now instead of risking a bear market.

(New York)

All the biggest names in bonds—Gross, Gundlach, Dalio—have been warning that a major bond bear market is on the way. However, Bloomberg is arguing that bears may have to wait as the tide in the bond market is reversing. Treasury yields’ rise has stalled, and in certain parts of the world (e.g. Germany), yields are once again falling. The big reason why is global fears over a possible trade war which could sink the economy broadly. This would weaken inflation and hamper hikes by central banks, pinning rates.

FINSUM: We have repeatedly said that we do not think there will be a bond bear market. There is a lot of natural demand for bonds given the aging population, which should keep yields at bay even if other forces are causing them to rise.

(New York)

In a refreshing article given the relative doom and gloom over the last month, Barron’s has published a piece arguing that it is the bears, not the bulls, that need to be afraid of the equity market right now. The view is based on technical analysis. Many might be interested to learn that rather than the technical indicators showing a bull market at or near its peak, signs are suggesting a move upward may be in store. The piece is also quick to point out that despite the shallow correction a month ago, the bull trend for the market has continued unabated.

FINSUM: We don’t put a great deal of stock in technical analysis and only view it as useful as a companion to fundamental analysis. Nonetheless, it is good to stay abreast of this information.

(New York)

Many who are worried about the future of the stock market take solace in the fact that the US economy looks strong. If the economy is doing so well, the market is less likely to fall, or so the logic goes. However, looking at history, that understanding is unwarranted, as stocks lag well in advance of economic downturns. In fact, the market usually tops out well before any economic downturn begins, and by the time a recession actually starts, stocks will have long since been in a bear market.

FINSUM: This is an excellent point. Just as the current bull market started during the fallout of the Financial Crisis, the bear market will probably start when the economy looks like it is in full swing.

(New York)

Okay investors, hold on to your hats. A big name has just come down with a stern and gloomy warning for the markets. JP Morgan is saying that stocks may have a giant bear market. How big? Try a 40% correction, according to the bank’s co-president. Daniel Pinto, the bank’s co-president who oversees trading and investment banking, says that markets are bound for a big correction because of fears over rising interest rates and inflation. The bank thinks the market will see a two- to three-year downturn where prices will fall up to 40%.

FINSUM: This is a big correction that JP Morgan is calling for. We do think the market might go through a rough patch, but we don’t know if it is going to reach these kind of Financial Crisis era proportions.