Experts split on whether a big correction looms
While 2 market watchers say the current downturn isn't the start of a major sell-off, another predicts a 15% decline.
The rough month for stocks -- capped Friday by another sharp decline on Wall Street -- is raising concerns about whether the recent sell-off is the start of the long-feared correction and whether 2014 is doomed because of the often-accurate January barometer.
Two leading market watchers told CNBC that the recent downturn won't turn into a true correction, but another analyst predicted a steeper 15 percent decline.
On the optimistic side, JPMorgan chief U.S. equity strategist Tom Lee said in a Squawk Box interview that he doesn't think a 10 percent correction is likely. "The reason I think we're not going to go down as much as 10 is the high-yield market is behaving. And (the) high-yield market has led equities."
"I think we're within a couple percent of the bottom," Lee added, predicting stocks could "decline like (during one of the sell-offs) last year, which by the time we were down 6 percent or 7 percent it feels horrible."
He concluded that 2014 is going to turn into a solid year. "I think we're going to end at least at 2,075."
James Paulsen, the chief investment strategist at Wells Capital Management, also told CNBC that the current market drop is not the start of a 10 percent correction. "When I look at the character of the market, this isn't it. I think we're maybe going to rally higher this year before we get a 10 percent correction."
"We may be bottoming here over the next few weeks," Paulsen said. "I just don't think the market is facing as many hurdles as we seem to think."
"The big elephant in the room at the end of the day is going to be momentum over the United States economy," he added. "And it's pretty good" -- an assertion backed up by the release Thursday of the government's GDP report, which showed the economy grew by 3.2 percent in the fourth quarter of 2013, in line with expectations.
"If we continue to print good numbers in the United States, the market is going to forget about emerging markets." Paulsen said. "If the market stays down and shows some signs of bottoming, a lot of new buyers (could be) coming into the market."
He expects the Standard & Poor's 500 Index ($INX) to rise toward 2,000 sometime this year before correcting back toward 1,850 by year's end.
After last year's 30 percent gain, stocks have had a rough start in 2014. The Dow Jones industrials ($INDU) have dropped by more than 4 percent as of Thursday's close, while the S&P 500 Index has fallen by about 3 percent.
If the adage "As goes January, so goes the year" holds true, investors could be in for a volatile year. The January barometer has been right in 62 of the past 85 years, or 73 percent of the time.
Let's turn to the bad news now.
Crunching historical numbers on stocks, one strategist who spoke to CNBC on Friday warned the market could see a painful 15 percent correction.
Rick Bensignor at Wells Fargo Securities told Squawk Box that his research shows parallels between the market highs in December and the peak in September 1929.
Notice the similarities between the two charts.
He stressed that he's "not looking for a crash . . . like what ultimately took us to the 1932 bottom," but pointed out the first leg of the decline then was 15 percent.
Given market forces today, a similar 15 percent decline could happen in the near-term, he added.
More from CNBC
Oh, the real GDP number, before they re-normed how they calculate them in Q3 of 2013, is less than a 1% increase. Unemployment, the number we should be watching is the U6 rate, not the U3, as it counts those that have finally given up looking for work and those that are severely underemployed; that number is over 13% !!!!
Smoke and Mirrors and printing money does not constitute a stable economy!
Why does anyone still listen to analysts?
The real deal is that corrections are normal, and I can say with near 100% certainty that one is coming.
What I don't know is when.
Does it start tomorrow?
Five years from now?
No one knows; if they say they do, they are either lying or don't know any better.
Just stay the course and don't change strategies based on some idiot on TV
Even with the fake GDP figures they couldn't get this thing off the ground. Ask a real estate salesperson when is the best time to buy? Answer today. Ask anyone on Wall Street which way the market will go? Answer UP.
But be careful what you wish for, a lot of state and local pension money is invested in the markets and a lot of the federal government's income comes from capital gains both short and long term. So in the long term, another big downfall will hurt the big government crowd as well eventually. Then everyone can cheer, you for me and me for you all in misery together. Wow, what fun. Sounds like FDR's 1930's all over again.
The retired people are taking more money out of the stock market then newbies are putting in. Can you say stock market crash???
Inflation is running at a real rate of 4 percent a year which is why banks are not loaning money at 3.5 to 4 percent for houses as they will lose money in the coming years as inflation increases due to Bernanke's QE's
The Fed will have to start increasing rates to stop the increases in inflation. So expect to see rates go up to 3 percent by end of year and perhaps above 6 percent in 2015.
With house rates back up to about 7 percent and inflation crawling back down to 1 percent due to the Fed's increase in rates the housing market should boom as banks will have a 6 percent spread between their rates and home loans once again. They will not be losing money on home loans due to inflation.
Next time the Feds taper the QE3 they will most likely cut by $20 billion a month done to $45 billion to get the QE3 to zero by end of year.
Yep without Bernanke pushing QE3 the asset class will fall like a rock as retired people take their money out to live on.
The "Bear" is out of hibernation:
We as a "Country" have tried to extend our help and support to those across the globe who have suffered an economic meltdown.
We saw that the need was in favor for our "growth and prosperity" in our own country, yet we were unable to "Create" enough money to override the fall and has but exacerbated the inevitable.
Those who have been "In the Know" and some of us lucky enough to have followed their lead, have made a great deal of money in the "Longest running Bull market" on our times, due to this "Intervention of our Government".
Now we will pay for the flaws of man, in our country and that of those who govern those countries who have wasted and mismanaged or totally destroyed the very standard of which they lived by.
China will see an uprising of their own people for fair play in their "Government and workplace".
Greece, Turkey, Spain. Portugal, Italy, Argentina, Russia, France, India almost everywhere one look, one can see an economy gone wrong.
We are no better off then they are, we just happen to have a larger banking system, and the world revolves around the strength of the U.S. Dollar. We've printed more money then ever before and our government became its' own broker and bought up its own treasury bonds. We gave 0% interest to the wealthiest and they bought up their own companies stock, or the companies bought up their own stock and the DOW is now hurting due to an overvalued market.
It is time for us to pay for the "bailout" of the last depression we tried to avoid, in retrospect we only extended the payment due..
So, Take your money kids and run, the "Bear" is out of hibernationThe DOW is about to go South..It's not the end of the world it's just the end of the "Bull" for now. Brighter days are ahead, down the road.
Every investor needs to make investment decisions that they can sleep well with.
far too long!! Besides Wall Street needs to see the world from a Main Street level!!
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The solid report comes a month after the retailer closed all of its Canadian operations.
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