Arthur J. Villasanta – Fourth Estate Contributor
New York, NY, United States (4E) – American multinational investment bank Citigroup, Inc or Citi warns that a “full-on bear market” might be upon us in the next few months.
A bear market is one exhibiting a price decline of 20 percent or more over at least a two-month period. The Shenzhen stock market in China is now in bear territory.
Citi explained that the U.S. stock market is in the third (of four) phases in global market activity. It believes markets might be only a few months from entering a “full-on bear market” — or the fourth phase — if historical precedents are taken as a guide.
Citi said the fourth phase is characterized by “a full-on global bear market, usually associated with a US recession.” Citi noted that “Stock market bubbles burst. Dips should be sold not bought. More defensive and contrarian strategies deliver.”
It pointed out that phase three lasted only four months during the most recent market cycle. This means that phase four might not be that far off, especially given that the third phase of the cycle started in February. City noted, however, that the third phase lasted 16 months in the late 1980s and 32 months in the late 1990s.
Phase three comes after the peak of the market and is analogous with the period usually known as the “late cycle.” This cycle usually “favors growth and momentum trades and has produced bubbles in the past.” Phase four is when things start to go downhill, and where markets and the economy enteri a downturn. This often includes a recession.
Citi said that just three of the 18 indicators it tracks are showing red flags. On the other hand, nearly all these indicators waved red flags did prior to the 2000 bear market, which was triggered by the dot-com crash.
Article – All Rights Reserved.
Provided by FeedSyndicate