Amos Newcombe’s Weblog

2008 April 21 Monday

The Bear Market Rally is Over?

Filed under: markets — Tags: , — anewc2 @ 9:38

From the Financial Times, because all of a sudden I am seeing Draaisma’s name a lot, and I want to track his record. Especially since his message resonates with me.

Draaisma: “The Bear Market Rally is Over”

Is Morgan Stanley’s equity strategist just unimpressed with the Bank of England’s efforts at a rescue package?

The second half of the bear market rally turned out to be rather shortlived, and Teun Draaisma is calling the top:

MSCI Europe is now up 11% since its trough on March 17. The biggest certainty for the next 12 months, in our view, is that there will be a big earnings miss, as margins are at all-time high levels while top-line growth is slowing and costs are rising, and expectations are too high. However, as is common in bear markets, we expected a bear market rally of 10%+ on the back of a drastic policy reaction to the problems at hand….

… We think that the bear market rally is now over, mainly because most policy action has now been taken or is now fully expected, while our all-important market timing indicators have given us the warning that the rally is over.

Is The Worst of the Credit Crunch Behind Us?

Filed under: markets, outlook — anewc2 @ 7:57

In a word, no. From The Big Picture:

One of the more common refrains we keep hearing is that the worst of the credit crisis is behind us. Not only that, but banks have written down so much bad debt, that there is an upside surprise ahead of us!

I’m not so sure about that. As to the first part, credit spreads, mortgage rates, and the actions of the Bank of England strongly imply we are still in the thick of it. As to the latter, I simply doubt management has been that forthcoming.

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