Ned Davis Research says a bear stock market, generally defined as a decline of at least 20 percent, isn't out of the question for this year.
In a report issued Friday, the firm, which has been bullish on stocks
for most of the rally since March 2009, says it expects continued gains
for now, The Wall Street Journal reports.
But the firm warns that if investors grow overly enthusiastic during the
next several weeks, sending prices too high, the market could tumble
later in the year, the paper says.
Ned Davis Research looks at various indicators to determine whether a
bear market is coming. These include ones measuring whether stocks are
ascending broadly through many industry sectors and countries, or
whether a shrinking cadre of large, expensive issues are leading the
The second situation has pointed to bear markets in the past. But while
the indicators have dipped a little recently, they don't point to a bear
market yet. So Ned Davis isn't steering clients clear of stocks yet,
The Journal reports.
One expert who believes a big drop is definitely in store for the market
is Marc Faber, publisher of the Gloom, Boom & Doom Report. He
thinks Federal Reserve easing has artificially inflated stocks.
"I think the market is way overdue for a 20 to 30 percent correction," Faber tells CNBC.
"In fact, I'm hoping for the market to drop 40 percent so stocks will again become — from a value point of view — attractive."
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