Timing the next bull market in stocks
Markets are down again today (MSCI world index down 0.7 pct so far this morning) and the market overall is nearing a bear market territory again (from a three-year high hit in May).
But asset managers are starting to look forward. JPMorgan Asset Management reckons that if one assumes the current bear market for most equity indices started in 2000 and that the the trend of the previous experiences is to be repeated, then the current environment should be ending around 2014 (By the way, those who predict stock market cycles with sunspots activity reckon the year 2012 or 2013 is the bottom, but that’s a different story.)
But 2014 does seem a long way off.
“While this may sound depressing from 2011, we hasten to add that we are not expecting the ongoing bear market to result in continued downside, but rather in persistence of broad range-trading prior to a sustained breakout to the upside,” Neil Nuttal of JPM AM writes.
Nuttal says that since 2000 the S&P 500 average level is close to 1,200 (compared with Thursday’s close of 1,216.13) , meaning the market has not slid too far out of range.
“At present, the wall appears to be very much in evidence while providing very little opportunity for ascent, notably in Europe, but not exclusively so… The majority of investors are light of risk, meaning that the pain trade (the development that would cause the most pain to the most people) would be a sharp rally in risk assets,” he adds.