THE BEAR MARKET RALLY IS OVER?
Morgan Stanley dice di si.Occhio...il mercato lo fa Goldman Sachs, tuttavia loro non lo dicono....loro devono guadagnare. Quindi Morgan stanley potrebbe avere ragione!
Basta comprare. It is time to sell....
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.
So the bank’s valuation indicator is saying its time to take profits, while its market timing indicator suggests that the rally has come to an end.
Sentiment has recovered somewhat. And of course, the authorities have made their drastic plays to avert the “financial end of the world.” But that still leaves us facing a big earnings recession, adds Draaisma.
We forecast a 16% fall in European earnings in 2008. Consensus earnings expectations have been cut 6% so far this year but still imply 6% growth, which is unrealistic in our view. Several other macro-economic triggers seem likely to get worse in the coming months too as US foreclosures rise, the UK mortgage and housing markets deteriorate and the credit crunch hits continental European growth. In general we’re set for a sustained period of weak economic growth in western economies as the credit crunch impact takes a long time to play out. Conversely, the growth dynamic in some of the major emerging economies is underpinned by secular forces (urbanisation, infrastructure spending, technological adoption) and should prove resilient to the developed world slowdown. In turn, that means commodity prices are unlikely to ease significantly this year, in our view; this supports our positive bias to the oil, utilities and materials sectors.
Stand by then for “directionless but volatile markets until/when earnings trough and no new bull market till earnings rise again, possibly starting in 1H09.”
Patience and capital preservation are key in a bear market and there is no need to call for the end too early on. Three fundamental things may signal the end of the bear market: 1) US inventories of unsold homes close to 5-6 months, which is when the market is balanced; 2) European ROE back to average levels rather than still at peak levels; and 3) senior loan officers loosening lending standards rather than tightening.
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