This Bear Market Will End With Lower Oil Prices
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The Dow is down 19.9% from its high last fall. Technically it takes a 20% drop in stocks on multiple indexes to define a bear market. That puts US stocks pretty damn close. But is there light at the end of the tunnel? If there is, you’ll know it when you see significantly lower oil prices, says Eric Roseman.
“Though the Dow and other major averages so far have averted the 20% drop that historically has defined a bear market,” says the LA Times, “many on Wall Street are convinced that a bear is underway and that it may be a particularly bruising one given the tangle of problems afflicting the economy.”
Barrron’s is less delicate. “Welcome to bear territory,” says the mag.
Friday’s sell-off made it official: the bear market has arrived, ushered in by the nasty combination of record-high oil prices and renewed fears about the financial sector. So, we thought it was time to check in with the gent who warned back in December that the bear was at our doorstep: Paul Desmond, president of Lowry Research in North Palm Beach, Fla […]
“We think we’re still quite a ways from a bottom,” Desmond warns. Over the next year, he expects the Dow to fall 30% to 50% from its October ‘07 top. The market could enjoy a few short-lived rallies during that span, like the one we experienced from March through May. But each rally is apt to result in a lower high and a lower low in the market.
“The good news is that bull markets or big rallies follow bear markets,” says Eric Roseman in The Sovereign Society…
Those bull markets usually result in significant double-digit gains for investors. But the key is to avoid losing money in the meantime. You don’t want to get smashed during a bear market so another investor can recover quickly and begin raking in the profits once the primary trend changes.
From its peak last October, the Dow and the S&P 500 Index have now declined a cumulative 19% heading into today’s trading. If history is correct, this suggests that stocks still have another 12% or so of losses ahead before forming a bottom. That means more pain lies ahead for investors in stocks.
But there is light at the end of this dark tunnel. I’m finding a plethora of bargains worldwide right now. That includes big dividend-paying stocks that trade at a multi-year low. Many other large-caps trade at similar levels.
This bear market will end — eventually. The first step to the next bull market is sharply lower oil prices. Until energy prices retreat, stocks will continue to suffer losses.
Source: History Suggests More Pain Lies Ahead for Investors
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Tags: , bear market, Downturn Strategy, Eric Roseman, US recession, US stocksAbout the Author
Eric serves as an editor and Investment Director for The Sovereign Society's Commodity Trend Alert. Eric's talents include blending a dozen or more alternative investment funds to produce consistent returns to traditional asset classes and making commodity based recommendations with huge upside and limited downside.
The Offshore A-Letter specializes is an elite global investment opportunities, asset protection strategies, tax management solutions, second citizenship and residency programs and offshore structures.