Helping You Build Wealth With Honest Research
Since 1996. Try Now

MEMBER'S LOGIN

MEMBER'S LOGINX

     
Invalid Username / Password
   
     
   
     
 
Invalid Captcha
   
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Bear market in stocks not very far
Thu, 12 Aug Pre-Open

There is a very famous stock market anecdote. It says that the stock market has predicted nine of the last five recessions. Well, we are not trying to make fun of stock market's forecasting ability. In fact, we believe that it is one of the best indicators of economic movements. And that too in both directions. In other words, stock markets more often than not peak a few months before the recession sets in and they also bottom out few months before the recession ends. There have been quite a few historical evidences to prove this. Thus, stocks could well be one of the best economic indicators around.

Have you ever wondered what the predictor of the stock markets themselves is? To put it even more simply, do you know what marks the end of a bull run and the beginning of a bear market in stocks? David Rosenberg, one of US' top strategists perhaps has the answer. Rosenberg talks of a particular indicator and he believes that this metric signaled in 1990, 2000 and 2007 that a steep drop in stocks is only two months away.

This indicator is nothing but the yield on the 10-year US Treasury bond. As per Rosenberg, the yield on the 10 year note hit its nearby peak on April 5, 2010 and has gone on to plunge more than 120 basis points since. Whenever such a scenario has developed during the last three major bull runs, a steep drop in stocks has only been two months away.

"Declines of this magnitude very often presage the onset of bear markets and recessions. Typically, equities and then economists are late to the game...What is key to note is that the bond market is the tail that wags the stock market's dog-it leads", Rosenberg is believed to have said.

We do not know for sure whether the bear market in stocks is round the corner or not. However, evidence does point towards this fact. With the effect of the stimulus waning away, the US economy has begun to struggle yet again and may even contract during the second half of the current calendar year. This certainly does not bode well for corporate earnings which in turn could put pressure on stock prices. Thus, it turns out, the 10 year note could prove to be correct yet again.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

View all commentaries | Archives

Read the latest Market Commentary


Equitymaster requests your view! Post a comment on "Bear market in stocks not very far". Click here!

  
ABOUT EQUITYMASTER

Since 1996, Equitymaster has been the source for honest and credible opinions on investing in India. With solid research and in-depth analysis Equitymaster is dedicated towards making its readers- smarter, more confident and richer every day. Here's why hundreds of thousands of readers spread across more than 70 countries Trust Equitymaster.

PREMIUM PRODUCTS
QUICK LINKS
POPULAR TOPICS
TRENDING TOPICS
FREE NEWSLETTERS
EQUITYMASTER SUPPORTS
  • HelpYourNGO
  • You Tube
  • Linkedin
  • Twitter
  • Telegram
  • Google Play

Copyright © Equitymaster Agora Research Private Limited.

Whitelist | Refer | Terms | Privacy | Contact | About | Sitemap

Phone +91-9136015013

Equitymaster Agora Research Private Limited (Research Analyst)
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Email: info@equitymaster.com. Website: www.equitymaster.com.
CIN:U74999MH2007PTC175407

Name of the Compliance & Grievance Officer: Ms Sonal Ramachandran
Telephone: +91-22-61434003 | Email: compliance@equitymaster.com

LEGAL DISCLAIMER:
Investment in securities market are subject to market risks. Read all the related documents carefully before investing.
Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

All rights reserved. Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA, Canada or the European Union countries, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.