Is the Market Correction Over?
After the Dow Jones Industrial Average (DJIA) took a massive 376-point plunge on Thursday, nearly everyone is wondering if the current market decline is over and stocks will begin to rebound. Noted financial advisor and CEO of USA Wealth Management, LLC Dennis Tubbergen has a one-word answer when asked if he believes this will happen next. That word is No.
“Yesterday’s decline was too broad and too across the board for a meaningful, longer-term rebound,” proclaims Tubbergen. “I have been talking for over a year about the excess debt in the economic system worldwide and the fact that this debt problem will have to be dealt with in some fashion. I believe the markets are now waking up to this fact. And, the more aware of the circumstances and consequences that market participants becomes, the more likely the markets will continue to decline.”
As Tubbergen notes, the stock market news showed that all the stocks in the DJIA finished down on May 20th. Of the 500 stocks that comprise the S&P 500, 497 of them dropped by the end of the trading day. Volume on the New York Stock Exchange was heavy with over 2.1 billion shares traded and downside volume was over 98% of total volume.
“Those are not the statistics you would expect from a normal correction,” warns Tubbergen. “I have maintained that the stock market rally over the last year was a bear market rally. A few of my colleagues and a few of my clients thought I was ‘off my rocker.’”
While those individuals adopted the mindset of believing the Keynesian economic rescue package implemented by the government was turning things around, Tubbergen now sees growing evidence that his original opinion on the need to reduce debt may be correct.
“There will be stock rallies along the way, but I believe the current market fundamentals point to a longer-term decline with stocks possibly re-testing or even exceeding the lows of early 2009,” he states. “While admittedly I do not have a crystal ball, basic economic fundamentals continue to remain poor.”
“There is also doubt that Greece will have the financial discipline to do what they need to do in order to get their financial house in order,” explains Tubbergen. “Once markets fully wake up to these facts and the doubt spreads, I believe markets will again react negatively.”
So what does Tubbergen forecast for the near future?
“The Dow under 9,000,” he concludes. “Buckle up. I think we may be in for a rough ride.” Unfortunately, buy-and hold investors could see some turbulent days ahead.
For more information on Tubbergen’s views, visit www.dennistubbergen.com.
The opinions expressed herein are those of the writer and not necessarily those of USA Wealth Management, LLC (a federally registered investment advisory company). This update may contain forward-looking statements, including, but not limited to, statements as to future events that involve various risks and uncertainties. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual events or results to differ materially from those that were forecasted. Therefore, no forecast is considered a guarantee. Investors should seek assistance prior to making any financial decision. Investing in securities involves a risk of principal loss. Information obtained from third party resources is believed to be reliable but the accuracy cannot be guaranteed.
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