Stock markets around the world have overrun equilibrium levels and are thus likely to drop back through November, says Robert Parker, vice chairman of asset management for Credit Suisse.
“During October and November, we could see up to a 10 percent correction in developed equity markets and 20 to 25 percent in emerging equity markets,” Parker told CNBC.
He doesn’t expect a bear market, as rising corporate earnings and investor willingness to commit cash would buoy global stock markets.
“I don’t think this is the start of another bear run, I just think that we could see quite a significant correction. What we’re saying now is take risk off the table.”
Parker sees a consolidation throughout credit markets this month and next.
“All our risk models show the risk positions taken by investors in markets are now looking very overextended.”
The Standard & Poor’s 500 Stock Index has soared 54 percent from its March lows as of Oct. 2. And the MSCI Emerging Markets Index is up 60.7 so far this year.
“If we look at valuations, notably in emerging markets today, we’ve moved from being very cheap in March to the middle of the range," Parker said.
Others see a correction too. “We would not be surprised to see a 5 percent-plus pullback in the (U.S.) marketplace,” Michael Mullaney, a money manager at Fiduciary Trust, told Bloomberg.
But, “I still think we’ll be higher by year-end.”
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