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Morgan Stanley predicts new bear market

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January 29, 2010 – Comments (12)

Bears are back as Morgan Stanley tips share slump

MICHAEL PASCOE January 29, 2010 - 11:18AM

The bears are out again at Morgan Stanley, predicting a 25 per cent fall in developed world stockmarkets this year. They’re just not sure whether the fall has already started or if there’s one more leg up before the dive. The analysis is aimed more at US and European markets than Australia, given our hybrid developed world/China nature, but the investment bank’s strategy team reckons Asia is riding for a fall as well. And Australian market sentiment still takes its lead from Wall Street more often than not. In his latest research note to clients, Morgan Stanley’s Gerard Minack’s own hunch is that the present wobbles will pass, allowing markets to regain their poise before the substantial mid-year fall – a bear market.

The forecast is based on two key beliefs: that markets have run well beyond fundamental justification and will become disappointed with tepid developed world economic growth; and, more or less, that “this is what always happens” after a big relief rally. “We don't think that developed equities have started an extended bull market,” writes Minack, a rational bear leading up to the GFC. “We see the rise from March 2009 as a typical relief rally that follows major bear markets. Those relief rallies can occur regardless of underlying macro conditions, regardless of liquidity conditions and - most importantly - regardless of what happens next. “The fundamentals did improve this time - systemic financial crisis ended - but we think risk assets have swung to pricing a better outlook than is likely.” He argues that the average initial relief rally is around 70 per cent – the sort of rally most developed equity markets have seen with the MSCI World market index showing 77 per cent growth from its March low. (Perhaps beneficially, the Australian market is lagging on that count, pegging closer to 60 per cent.) “After the relief rally there is, on average, a 25 per cent pull-back - so, technically, a new bear market. That's what we expect at some stage this year.”

More at the link

12 Comments – Post Your Own

#1) On January 29, 2010 at 5:30 PM, kdakota630 (29.88) wrote:

They’re just not sure whether the fall has already started or if there’s one more leg up before the dive.

My guess:  one more leg up.

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#2) On January 29, 2010 at 6:13 PM, davejh23 (< 20) wrote:

My guess:  the Dow falls below 10K early next week and the S&P falls below 1,000 by Feb. 12th.

I just did a favor for the bulls...I'm always wrong, so my stupid guess will make the market rally next week. 

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#3) On January 29, 2010 at 8:54 PM, binve (< 20) wrote:

Hey GMX, I don't know if you saw this one, but there is my long term bear projection and how to confirm that it is actually occuring (versus just being a bearish correction) and how long term investors can play this trend in a relatively low risk manner: What To Look For As a Long Term Trend Change Confirmation - http://caps.fool.com/Blogs/ViewPost.aspx?bpid=330257. Thanks man!

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#4) On January 29, 2010 at 9:13 PM, tonylogan1 (28.32) wrote:

So nice of th fine folks at Morgan Stanley to wait until the market drops to tell us the market is going to drop (or maybe go up)

Thank you. Sincerely

tonylogan

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#5) On January 30, 2010 at 1:14 AM, fmahnke (89.19) wrote:

I thought they were just calling for 1250 last week,  Perhaps that means it is time to go long

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#6) On January 30, 2010 at 12:56 PM, bothisellhigher (< 20) wrote:

I think the supporting timbers splintered with the recent penetration of S&P $1091. As long as prices stay under that level, or decline even more (probable,) it is the Bear that dominates-and my trades are short right now.

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#7) On January 30, 2010 at 1:21 PM, semper77 (33.69) wrote:

Yep - exactly what I posted in your last entry - 25% down from here. I'm a bear to S&P 768.

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#8) On January 30, 2010 at 2:00 PM, APJ4RealHoldings (34.78) wrote:

Morgan Stanley can predict equity markets now?

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#9) On February 04, 2010 at 12:40 PM, ttboydxb (28.95) wrote:

binve, nice post! Thanks for reposting, I had missed it!

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#10) On February 04, 2010 at 1:50 PM, USNHR (32.77) wrote:

I'm thinking one more leg up.

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#11) On February 04, 2010 at 1:55 PM, goalie37 (91.47) wrote:

How can well educated men and women persist in believing they can predict the future?  Do they read sheep entrails or visit oracles?

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#12) On February 28, 2010 at 2:06 AM, checklist34 (99.73) wrote:

Didn't I already get drunk once and post that I'd give any taker a $100,000 car if the S&P went under 800 again in ABC timeframe?  Don't make me get drunk and post it again, I haven't felt like drinking lately.

I believe the S&P was at like 880 at the time.  

Anyway, I don't much care which way the market goes!  I got close enough to the time I bought most of my shares to hedge them up with fairly cheap options or sell them (clear of 1 year) precariously near my portfolio high.

Bring it on....  and then if we hit 800 and all the bears are crying for 700, and then if we hit 700 and all the bears are crying for 600 (thats what bears do, no matter how low shit goes they just lower their targets)...

i'll triple my money again coming out of it.  I learned alot from the mistakes I made last time.... maybe I can do better this time...  ???

happy days

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