Ned Davis Still in Secular Bear Camp

By on April 23, 2012

bear marketJeff Sommer, writing for The New York Times, opines about stocks and the economy, which he says are singing different tunes currently. The views of Ned Davis, founder of Ned Davis Research, figure prominently in the piece. Davis has a wide following among money managers, according to Sommer.

While Davis expects stocks to rise over the next six months, he feels the economy has “deep-seated maladies” which bolster his view that equities remain in a secular bear market. Davis has written, “I am concerned about the long-term consequences of the Fed’s zero interest rate and easy credit policies and exploding government deficits.”

The rise since 2009 has been part of a cyclical bull market (strong upturn within the longer downward trend), according to Davis.

Davis’ firm believes there could be a mild correction in the next 6 months, but currently it doesn’t make sense to, “fight the Fed and fight the tape.” A modest decline would prepare the way for a bigger run upward for several months, which Ned Davis Research sees as the likeliest outcome.

According to Ed Clissold, United States market strategist for Ned Davis Research, “global deleveraging still needs to be completed, and that will have negative effects for the stock market.”

Sommer concludes:

Buy-and-hold investors who maintain diversified portfolios and rigorously reinvest dividends and interest can try to ride out these cycles, Mr. Clissold said, and “have what will probably be modest returns” in the years ahead. Market professionals who try to do better than that will need to be nimble indeed.

Source: The New York Times

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