macro strategist — who regularly publishes thoughtful research on a wide range of topics — thinks the bottom may drop out of the marketThat may seem like an aggressive forecast give the tight time frame, but Deluard lays out a compelling four-part argument to support his near-term bearish view. If his overall take had to be summarized into a single theme, it's that the drivers supporting stock strength will soon be impediments.
"To the extent that stock market seasonality does exist, it will stop supporting stock prices at the end of the month," he said in a recent report."Since 1973, stocks have tended to flat line from mid-May to the end of November."A great deal of recent stock-market punditry has focused on a so-called melt-up. While such an occurrence does push equities higher, it's usually viewed as a late-cycle indicator — a last-gasp effort for traders to ride the momentum wave higher.
Once again, the point of comparison is January 2018, ahead of the February meltdown. Deluard highlights the fact that conditions might be even more ripe for a correction this time around because there's less earnings growth expected for US corporations. He continued:"The combination of elevated valuations and poorer earnings growth prospects could trigger a larger correction this time. The stock market will be especially vulnerable to a correction as multiples are entering the danger zone."Upon first glance, the lack of shorts in the US equity market may seem like a bullish signal. But it's actually the opposite.
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