Featured # Mutual Funds & ETFs | 4 years ago

United States Headed for Short-Lived Bear Market

The United States’ bull market may be ending in the near future, yet there is no need to worry at this time. According to a CNNMoney survey of leading investment strategists, there is a nearly 50% possibility that stocks in the U.S. will dip into a bear market during this year. The good news is that the same survey revealed that many who predict the bear market also predict that it will not last for a sizeable amount of time. Kristina Hooper, a U.S. investment strategist at Allianz Global Investors is quoted on the topic saying, “There is certainly a decent likelihood that the S&P 500 falls into bear market territory, but it may only be there temporarily”.

Authorities on the subject claim that particularly if oil prices stop decreasing, the U.S. economy is too resilient to not bounce back quickly. They have predicted o average that the S&P 500 will close out the fiscal year with an increase of 2.5%, which would be nearly 11% above from where stocks are at the moment. Prolonged bear markets are the result of a country falling into recession, but the foundation of the U.S. economy are currently extremely strong. Kristina Hooper expanded on her analysis by highlighting a multitude of positive signals including: minimal unemployment rates, inexpensive gas, suitable sales numbers in retail, and a modest bump in wages.

The United States is a nation of consumers, and consumption is what fuels the economy. Even with Asian countries like Japan and China faltering, if American citizens can consistently find employment with greater incomes, the U.S. economy will remain sturdy through the power of consumption. These predictions lead to questions regarding investment in U.S. equities. Joseph Quinlan, chief market strategist for U.S. trust, responded to such inquiries, “Now is the time to be a selective buyer…For an investor with a three to five-year time horizon, this is a good time to increase equity exposure”. Quinlan is especially fond of large companies that pay out regular dividends.

Art Hogan, chief market strategist at Wunderlich Securities, claims that the S&P 500 is properly valued, as it is currently trading at roughly 15.5 times forward earnings. Simply put, U.S. stocks have returned to valuation levels that have not been realized in over a year. Hogan, however, agrees with Quinlan’s humble investing approach, saying that at this point in time it is best to place small selective bets. Kristina Hooper has a different view, as she advises now is the time to sit back and monitor the markets. More specifically she said, “Although valuations have come down, they are not necessarily attractive enough to begin buying in at this point”.

Another expert on the topic, Michael Arone the chief investment strategist at State Street Global Advisors, is keen on investing in companies that specialize in homebuilding. Arone recently stated, “The nascent U.S. housing recovery, combined with a strongly positioned U.S. consumer, makes homebuilders, building products and materials stocks and retailers that cater to the housing market attractive in today’s environment”.

Individuals who make their living through investing reportedly have the highest amount of money in their funds since 2001, according to Bank of America Merrill Lynch’s February Fund Manager survey. This serves as a strong sign that investor’s should follow Hooper’s advice and perceive how the following months play out in the market while refraining from making any new investments.


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