Analyst who called the correction sees bear market within a year

[Pitcher]

The stock strategist who predicted the S&P 500's drop earlier this year now expects a big market decline within 12 months.

Barry Bannister, Stifel's head of institutional equity strategy, is telling clients to prepare for a bear market and buy defensive stocks that perform better during periods of market turmoil.

"Our models for the S&P 500 point to minimal price upside in 2018 and a bear market (-20%) in the coming year. What matters for investors is that any decline is likely to be unusually rapid and occur as a result of P/E compression, resulting from policy risks not weak GDP," Bannister wrote in a note to clients entitled "The Fed's 'forced error': It's time to start moving to more defensive positions." 

Bannister said on Jan. 26, the day of the S&P's record high, that stocks will correct at least 5 percent this quarter as the Federal Reserve and other central banks tighten monetary policy. The S&P 500 subsequently dropped 10 percent through early February.

The strategist is still concerned about monetary policy. The Federal Reserve raised the benchmark funds rate Wednesday by 25 basis points to 1.75 percent. It was the sixth rate hike since December 2015.

In his note Wednesday, Bannister said the Fed's outlook for the economy points to more aggressive rate hikes.

"We're concerned the Fed's 2019-20 view grew more hawkish," he wrote. "We now expect deflationary policy errors to develop in 2018 to early 2019."

As a result, the strategist recommends investors buy stocks in "defensive" areas such as utilities, consumer household products and food companies.

Bannister reaffirmed his 2,800 S&P 500 price target, representing 3 percent upside to Wednesday's close. He cautioned the forecast may change on any sign of a sudden "break down" in the market.

 

https://www.cnbc.com/2018/03/22/the-analyst-who-called-the-correction-now-sees-a-bear-market-starting-within-a-year.html

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[bostonangler]

What goes up must come down.... The correction will be harsh for many. People who have seen huge gains in their 401k are going to wake up and wonder what happened. Then the spiral effect. Savings go down, but people will try to maintain the lifestyle by going in debt. Then their credit card bills are higher. Then spending slows down. Then companies layoff. It's a cycle and we are seeing the beginning. JMHO

 

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[Pitcher]

The market has cycles.  I don’t try to predict the market day to day, I’m looking for longer term trends. Currently we are in a volatile market.

When this happens people are trying to figure out which way it will go longer term. In 2008 when we had a big drop I saw the writing on the wall 6 months before.  I just had to wait for the technicals to give me the signs we were really going down. In 2011 (dec) and 2015 ( aug) I also saw signs of a rollover. In those cases we were very volatile for awhile then we went back up.   

 

As of Feb this year I’m seeing signs of a breakdown, we are sitting on the 200 ma on the S&P on Friday’s close.  Rumors of a trade deal with China has pre market up over 350 on the DJ-30.  You just never really know, especially in volatile markets. That’s why I wait to put money back to work until after I see the trend. Until I see that trend I Day Trade.  I was expecting a relief rally but will the Bull continue, only time will tell. I’m expecting a volatile week.  Best to you all.

[bostonangler]

There seems to be more and more people looking for a major correction. This week is the big week in earnings for the quarter, it could be the last really good one for a while. The big tax cuts will be figured in, and after that it will be interesting to see if our consumer economy can keep it going. My industry advertising, is a good leading indicator of things to come, and I see the money coming in is slowing down. It usually shows up a few quarters before the rest of the business world see a downturn.. Keep you eye on the direction of ad sales..... JMHO

 

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