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Millennium Wave’s Mauldin: Bear Market Has Five More Years

By Dan Weil   |   Wednesday, 18 Jul 2012 07:43 AM

The 12-year-old bear stock market has about five more years – and another recession – to run, says John Mauldin, founder of Millennium Wave Investments.

The 100 percent-plus rebound of the Standard & Poor’s 500 Index from its March 2009 lows doesn’t signify an end to the down cycle, as such corrections are normal for a bear market, he tells Yahoo.

After those corrections come more declines. "It generally takes three events to really make us negative about something, to wipe us out," Mauldin says. We’ve already had two with the recessions of 2001 and 2007-09, he says.

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“One more, and we’ll probably get a statistical bottom. Then we can see the beginning of a comfortable period to put our toes back in water.”

Price-earnings (PE) ratios in the low double-digits or single digits signify a bottom, Mauldin says. In the first half of the year, the S&P 500 averaged a PE of 13.8, according to Bloomberg.

At that point, expect another bull market that historically has lasted 17 years, Mauldin says. "We're just not there yet – patience."

Many experts are bearish on stocks for the short-term too.

Adam Parker, chief stock strategist at Morgan Stanley, sees the S&P 500 falling 14 percent through year-end to 1,167.

"The pillar of strength is U.S. corporate earnings, and now we're seeing signs that is cracking," he tells The Wall Street Journal.

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