Tags: stocks | Seiver | technical | fundamental

Economist Seiver: Stocks May Face Several Years of Losses

Friday, 16 Aug 2013 10:33 AM

By Dan Weil

Stocks look poised for a fall based on technical and fundamental factors, says Dan Seiver, a finance professor at San Diego State University and chief economist for Reilly Financial Advisors, a wealth management firm in San Diego.

On the technical side Value Line's median appreciation potential is showing stocks in a similar range to 2007, he told CNBC.

"That tells me that over the next few years, the returns on stocks aren't going to be particularly good, and they could even be negative."

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Stocks peaked at record highs in October 2007 and then dropped until March 2009.

On the fundamental said, profit growth won't top gross domestic product (GDP) growth, Seiver predicted. And given the weak economic expansion, "it's a little harder to justify — particularly with interest rates rising — the current levels of the stock market."

The economy averaged growth of 1.4 percent in the first two quarters. Going forward the economy might achieve nominal growth of 4 percent, he stated. That would mean real growth of 2 percent, assuming 2 percent inflation.

"If corporate profits are already at a record percentage of GDP, I don't see what's going to make that percentage even higher," Seiver noted.

"I think that valuations are on the relatively high side right now," he added. "I don't see great opportunities at these levels."

Looking at the short term, many other experts are bearish on stocks too.

"With weaker earnings, higher interest rates and geopolitical concerns, risk assets like stocks don't do well in that type of environment," Jim Russell, senior equity strategist for U.S. Bank Wealth Management, told Bloomberg.

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