While everyone else is worried about calling the bottom, Morgan Stanley’s Teun Draaisma is worried about calling the top - of the bear market rally.
The good news is it’s not over yet. But adds the strategist, known for his well-timed calls in last year’s market oscillations, we may be more than halfway there. The team sees another 2 per cent to 10 per cent upside in European equities.
The trigger for a bear market rally is invariably dramatic action by authorities. The ‘financial end of the world’ has been avoided, we believe, but that still leaves us with a big earnings recession. At some point, the earnings recession takes over again as the driving force in this market, but possibly not in the upcoming reporting season yet, as this one will not reveal the full extent of the earnings recession.
Draaisma thinks the market has hit the low associated with this earnings recession, on March 17 when the FTSE closed at 5,414.42.
So according to this favourite Draaisma chart, the current period of buoyancy for the London market should come to an end on or around July 17. You have been warned.
Related links
Stand by for a bear market rally - FT Alphaville, Feb 08
