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Bearish Market Strategist Warns of Looming 15% Correction in Stocks

Bearish Market Strategist Warns of Looming 15% Correction in Stocks


Stocks may be in record territory but one market strategist claims the bears are about to wrestle control and the S&P will correct up to 15%. | Source: Shutterstock

By CCN: If you think today’s stock market declines were ugly, things could be about to get worse. While the Dow Jones Industrial Average and S&P 500 indexes managed to bounce off their lows of the day, they still ended in the red. Worse, the sentiment seems to have shifted from one of optimism and record highs to selling fueled by fears of what the Fed will or won’t do. And if you ask one market strategist, you haven’t seen anything yet.

Cornerstone Macro Chief Investment Strategist Michael Kantrowitz told CNBC that the stock market could be due for a correction, saying:

“I think that as we get to the back half of the year and investors that expect…earning expectations to recover, that falls short, I think the market can fall 10%-15% easily from here…for the S&P.”

He also suggests that investors who are hoping the Fed will take a cue from President Trump and lower interest rates may be in for a rude awakening.

As the markets sit near record highs Cornerstone Macro’s @MichaelKantro says a 10-15% correction is coming. Here’s why

— CNBC’s Fast Money (@CNBCFastMoney) May 2, 2019

The S&P’s Bumpy Ride

Kantrowitz isn’t the only one sounding the alarm on stocks. Todd Gordon of Trading Analysis and CNBC contributor expects more volatility in the market. He pointed to a “series of higher highs and lower lows in the S&P,” which is the volatility he’s talking about. He gave a wide swath of where the S&P might trade, including a low below the 2,300 level and a high of up to 3,300.

The S&P may be at record highs, but @toddgordontrade says a troubling chart pattern could push the index below 2,300

— CNBC’s Fast Money (@CNBCFastMoney) May 2, 2019

Respect the Bull Market

Despite the uncertainty, stocks remain in a bull market for now. Not all market strategists are in the bearish camp. You can always count on Fundstrat’s Tom Lee for the bullish take. He thinks it’s a mistake to cough up the S&P’s recent gains to the Fed pausing on interest rates. He says there are “powerful dynamics” fueling stock prices, not the Fed. Lee also says “new highs are coming.”

It’s very telling that S&P 500 hits all-time highs and many dismiss it with “Fed paused, that’s way”

Breakouts need to be respected, after a 20% bear.

Investors need to recognize powerful dynamic driving new highs, not Fed.

Stealth #bullmarket —> new highs coming

— Thomas Lee (@fundstrat) May 1, 2019

His advice? “But the dips.” He tweeted:

“It also means that all this money on the sidelines (hedge funds with low “gross” and retail selling equities) is going to want to be re-invested in stocks if economic momentum is set to pick up in 2H19.”

Lee currently finds the FANG stocks attractive including Facebook, Amazon, Netflix and Google parent Alphabet.

The bears may be trying to wrestle control of the stock market from the bulls but only time will tell who wins.

About The Author

Gerelyn Terzo

Gerelyn is a fintech and cryptocurrency journalist who started her career writing about traditional finance/Wall Street. She has been reporting on financial services for the past 15-plus years. In full disclosure, she holds bitcoin (BTC).

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