Saga of Financial Markets


Last updateSat, 29 Jul 2017 12am

Back You are here: Home Market Market Update Insight Don't believe in the Rally?

Don't believe in the Rally?

Bob Auer, the senior portfolio manager with Auer Growth Fund, says this is one of the best buying opportunities of his career going back to the mid-80s. He believe there are reasons for a sustained rally.

  1. If the market rally fades, investors who have missed the rally will be anxious to buy on the dips.

  2. Everyone is negative (often a good sign).

  3. A recovery is ‘guaranteed’.

According to Bob, his research from 1892 to 2009 reveals that there have been 24 recessions, including this one. The previous 23 recessionary periods all turned to economic recovery and expansion with corresponding stock market gains in tow. This one will be no different…

English: Nouriel Roubini, Turkish economist, p...

English: Nouriel Roubini, Turkish economist, professor of economics at the Stern School of Business, New York University. From the Confederation of Norwegian Enterprise conference, 2009. ‪Norsk (bokmål)‬: Nouriel Roubini, tyrkisk økonom, professor ved Stern School of Business ved New York University. Fra NHOs Årskonferanse 2009. (Photo credit: Wikipedia)

But Nouriel Roubini – Professor at NYU’s Stern School and Chairman of RGE Monitor says the stock market rally is long in the tooth. He points to three factors that will lead to a correction in the near future:

  1. Volatility and Uncertainty will increase – the CBOE Volatility Index is currently down more than 50% since the October panic.

  2. Corporate Earnings will Disappoint. He says the market is pricing in a robust ‘V’ shape recovery. However, when earnings miss expectations, buyers will turn into sellers, as was the case this week with FedEx.

  3. The global Financial System Still Faces Serious Problems. Roubini thinks unemployment will rise to 11%, bank losses will increase across the globe, and the recession in Europe will get worse.

The silver lining: Roubini is not convinced the market will retest the lows.