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Piper Jaffray's Craig Johnson: Look for a 'Cruel, Cruel Summer' for Investors

By    |   Thursday, 22 May 2014 11:07 AM

Craig Johnson of Piper Jaffray is not a roaring stock market bear, but he is not overly optimistic. He predicts it could be a “cruel, cruel summer” for investors.

Johnson told clients a “stealth correction has been unfolding” in the market, based on the recent struggles of the small-cap Russell 2000 stock index, which has been teetering on a double-digit percentage decline from its March 4 peak.

Editor’s Note: Retire 10 Years Earlier With These 4 Stocks

According to USA Today, he sees the drop in smaller stocks being contagious for the larger-cap Dow Jones Industrials and S&P 500 shares.

Johnson expects a “frustratingly slow recovery” will keep a lid on stocks in the short term, and is hiking his exposure to defensive sectors such as energy utilities.

How bad will things get?

USA Today said Johnson is not expecting a bear market drop of 20 percent or more this summer, but he believes “conditions are right for a meaningful correction” of 12 percent to 15 percent from Wednesday's close, and that the S&P 500 could retest last summer’s lows around the 1,600-1,650 mark. The index hit an all-time high of 1,897.45 on May 13.

Johnson’s year-end forecast is a bit sunnier. USA Today said he is calling for the S&P 500 to end 2014 at 2,100, about 11 percent higher than Wednesday’s level.

Perennial uber-bear Marc Faber, publisher of the aptly named Gloom, Boom and Doom report, has a darker view of stocks. He told CNBC he is loading up on Treasurys instead of stocks.

The perhaps even more bearish John Hussman, founder of the eponymous Hussman Funds and a regular critic of massive Federal Reserve stimulus efforts, continues to see comparisons between current stock levels and epic bear drops from the past.

“Is this time materially different from 1929, 1972, 1987, 2000, or 2007? We doubt it,” he said in his latest weekly commentary. “We certainly can’t rule out movements further up the mountain … but those movements are likely to appear small in the context of what will be erased over the completion of the (bull) cycle,” Hussman predicted.

However, MarketWatch columnist Howard Gold noted the cottage industry of bearish prognosticators have been dead wrong since stocks hit a low in 2009.

“The financial crisis and Great Recession created a bull market in doom and gloom,” Gold said. “But nearly six years after Lehman Brothers’ collapse, the worst hasn’t happened, unless you consider a 180 percent advance in the S&P 500 Index a disaster. Which it was, to those who avoided U.S. stocks because they believed the doom-and-gloomers.”

Editor’s Note: Retire 10 Years Earlier With These 4 Stocks

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Craig Johnson of Piper Jaffray is not a roaring stock market bear, but he is not overly optimistic.
stock, market, bear, Dow
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2014-07-22
Thursday, 22 May 2014 11:07 AM
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