US Stocks Have Another 10%+ To Fall, Bear Market Seen

US Stocks Have Another 10%+ To Fall, Bear Market Seen

$DIA, $SPY, $QQQ

US stocks have another 10%+ to fall and participants should sit this volatility in cash.

The volatile market reaction to the lackluster US jobs report last week shows that markets, especially stocks, high-yield bonds and some emerging market debt, are trading like a casino.

Bond King, Bill Gross says that US stocks will drop another 10% because economic conditions do not support a rally like in Y 2013, when corporate profits were going up.

Today, corporate profits are flat-lining and low commodity prices are hurting energy companies. Bill Gross is the manager of the $1.4-B Janus Global Unconstrained Bond Fund.

“More negative numbers lie ahead and if you define a bear market by a 20 percent correction, at some point, that is 6 to 12 months, we will have a classic definition of a Bear Market, meaning another 10% downside,” he said.

Mr. Gross said, cash is the best bet until investors get a better view at what the US Fed and the economy are going to do.

“Cash does not yield anything but it does not lose anything,’’ so sitting it out and making 25 to 50 bpts in commercial paper compared to 4 to 5% in risk assets is not that much of a penalty, he said. “Investors need cold water splashed on their face and sit out the dance.”

The odds of a Fed rate increase this month fell to about 10%, according to futures traders, after US reports showed the pace of hiring slowed in September and wage growth stalled. Low wages and slowing employment puts a drag on retail sales and the economy. While the Fed needs to lift rates from Zero+ to fix distortions in the market that policy has created, it is now constrained from doing it..

Now, Bill Gross says, stocks may rally despite his read of the market. “That’s not to say that stock markets don’t defy logic — they do,” he said. “But I wouldn’t be on that train, put it that way.

US Major Market Indexes finished mixed: DJIA +13.69 at 16790.12, NAS 100 -32.90 at 4748.36, S&P 500 -7.13 at 1979.91

Volume: trade above average as more than 950-M/shares changed hands on the NYSE.

• NAS 100 +0.3% YTD
• S&P 500 -3.8% YTD
• DJIA -5.8% YTD
• Russell 2000 -5.8% YTD

Stay tuned…

HeffX-LTN

Paul Ebeling

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