Stock Market Could Be On Brink Of A Correction, Says Analyst Who Doesn't 'Expect A Bear Market Any Time Soon'

Global stock markets, which have been on a record-breaking spree, may be on the verge of a correction, according to a leading research firm.

What Happened: Ned Davis Research (NDR) has cautioned that the current market conditions could lead to a correction, reported Business Insider. While the firm’s chief global strategist, Tim Hayes, believes that a bear market is not imminent, he has warned that prolonged market enthusiasm could make it vulnerable to potential corrections.

Hayes pointed out that the DSI Global Sentiment Composite recently hit 84%, the highest level in nearly a year. When this excessive optimism wanes and the sentiment composite dips into neutral mode, the MSCI ACWI tends to decline, Hayes said. “[W]ith the one-year and four-year cycles becoming less favorable, a correction can be expected,” Hayes added.

“We don’t expect a bear market any time soon,” Hayes maintained. “The macro outlook lacks sufficient evidence to expect the return of crippling inflationary pressures or enough economic weakness to make a global recession an increased probability.”

Hayes predicts that 2024 could see one or more corrections, although they are unlikely to be as severe as those in 2020 or 2022, which were driven by recession, inflation, and interest rate concerns, according to the report.

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Why It Matters: This warning from NDR comes amid a series of similar predictions from other market experts. Morgan Stanley‘s Chief Investment Officer, Mike Wilson, recently reinforced his bearish stance on the stock market, citing apparent incipient speculation among investors. Wilson anticipates a potential 13% downside from the present levels by the year-end.

Earlier, Craig Johnson, the chief market technician at Piper Sandler, warned of a potential 10% correction in the stock market. This prediction was based on a series of technical signals indicating that the market may not be ready for a significant upturn.

Meanwhile, Cathie Wood, the CEO of ARK Investment Management, raised concerns about a potential market correction in the semiconductor sector. Wood pointed out that the semiconductor industry might face a market correction due to improvements in the supply chain.

These warnings come in the wake of a FOMO-fueled rally that has seen the stock market reach record highs. John Hussman, the president of the Hussman Investment Trust, has cautioned that this rally could lead to disappointing long-term results, potentially signaling a decade or more of poor returns.

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