Tags: stock | Paulsen | crash | bull

Wells Capital's Paulsen: 1987 Stock Market Crash Part II Lies Ahead . . . Maybe

By    |   Thursday, 03 April 2014 11:57 AM

Jim Paulsen of Wells Capital Management, who apparently sees the future in numbers, said in a client note that on May 27, the current bull market will be 1,311 trading days old, USA Today reported.

That is an important date because it was 1,311 trading days after the start of the 1982 bull market that the S&P 500 endured its biggest one-day point crash in history, on Oct. 19, 1987.

"Normally these kinds of things are just market oddities. But investors are taking this one seriously since there are such strong similarities with the 1982 bull market and the one the market is currently in," USA Today said.

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In fact, stock market charts that begin with the 2009 start of the current bull market, when overlaid with the corresponding charts that began in 1982 and ended with the 1987 crash, look eerily similar.

Paulsen noted the current bull market has staged a 175 percent rally from the low — which is also where the 1982 bull market was at this point in its run.

However, he is not out to scare his clients, and concludes a 10 percent correction is probably the more likely scenario ahead.

"Don't worry much, however, about another major style 1987 collapse. History doesn't usually fully repeat," Paulsen wrote in his note to clients.

In a less colorful piece, USA Today noted the price-earnings ratios of the top 10 biggest stocks in the S&P 500 today are nowhere close to the peaks that the 10 most highly valued stocks hit in 2000, another recent market blow-off year when the dot-com stocks imploded.

"The key difference is that the stocks that are in bubbles right now are not large enough to drag down the entire market along with them," remarked Bespoke Investment Group in a recent report. "A large decline in fuel-cell, marijuana or even social media stocks is unlikely to be a major market moving event."

Steen Jakobsen, chief economist and chief investment officer at Saxo Bank, predicted the S&P 500 is only a few points away from a 30 percent downdraft, according to CNBC. He pointed to technical resistance ahead at the S&P 1,900 level.

In Jakobsen's opinion, U.S. stocks are levitating because of corporate stock buybacks and investors who have piled into equities and corporate debt at the exclusion of other investment assets.

He forecast the S&P is about to be hit by a decline in real corporate earnings, as well as a "very significant" global slowdown.

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In the style of stock market oracles, USA Today is offering up an article speculating whether a 1987-style market crash is less than two months away.
Thursday, 03 April 2014 11:57 AM
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