Tags: Bianco | stocks | move | down

Deutsche Bank’s Bianco: Next Big Move for Stocks Is ‘Likely Down’

By    |   Monday, 16 July 2012 07:53 AM

Stocks are poised for a correction that could take them down more than 5 percent, says the normally bullish David Bianco, U.S. equity strategist for Deutsche Bank.

The economy stagnated during the middle of 2010 and 2011 just like it is this year, Bianco writes in his monthly report, obtained by Business Insider.

The stagnation triggered a slump for stocks in each of the past two years, with the Standard & Poor’s 500 Index falling 16 percent during the stagnation of 2010 and 19 percent in 2011.

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown

The economic stagnation could be worse this year, Bianco says.

“This is the third soft patch [in the economy] since the recession ended, and so far, investors seem less prone to panic,” he writes.

“This is probably because of prior wolf cries and missed buying opportunities in 2010 and 2011. However, soft patch III is arguably worse than I and II, as this time it includes Asia.”

While low valuations are buoying stocks, “it is important to consider that soft patches can easily trigger corrections,” Bianco says. “We believe the S&P 500’s next 5 percent-plus move is more likely down than up.”

Some experts see valuations and the weak economy in a standoff. “There is massive value in this market,” Randy Bateman, chief investment officer at Huntington Asset Management, tells Bloomberg.

“It’s going to be the vacillation between the perception of good value in the market and the concern over the economy.”

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown

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Monday, 16 July 2012 07:53 AM
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