Monday, March 7, 2016

This is a BEAR MARKET RALLY

In January I said that the S&P500 would fall from 2000/2050 to the 1500's as my target over 2016. I reaffirm this view.

To reiterate my bearish views on risk assets for H1 2016 (1st Half of Year) – I continue to see much lower equity prices, lower core bond yields, wider credit spreads, and weakness in EM and commodities over the next four months (at least),

To highlight that, in my view, stocks’ counter-trend bounce off the February lows has now run its course and I believe we are – in early March – likely to see the onset of the next leg weaker in risk, vs stronger in core duration. I expect this next leg of weakness to last three to five weeks and to result in new lows so far in this cycle in stocks (S&P500 into the 1700's) and new lows in core government bond yields (target 1.5% in 10yr USTs).

It is important to remember that in bear markets the strength is to the downside, the violence is to the upside, with counter-trend rallies in bear markets often being the most painful. Markets simply do not go down (or up) in straight lines. But if I am right that this bounce is over, we should continue to see a series of lower lows and lower highs in stocks around the globe.