As a growing number pundits call the bottom for equities, the latest market watcher to weigh in with the suggestion that stock markets are oversold is Marc (aka Dr Doom) Faber. We won’t go into detail (as subscribers to his monthly newsletter tend to get upset if we do), but broadly, Faber’s latest missive notes significant improvement in stock markets around the world, despite continued deterioration in economic conditions, and suggests an “intermediate positive stance”.
Asian equity markets are particularly attractive, he says – also in light of the growing likelihood of further dollar weakness. Indeed, as the FT reported Tuesday, Asia-Pacific equities were positioned to mark their biggest monthly gain in a decade on Tuesday, despite declines this week in some major markets including Japan (where stocks however have held up remarkably well considering relentlessly grim economic data).
Whereas Faber doesn’t expect any full stock market recovery within the next two years – and doesn’t feel we’ve yet seen the final low in the current bear market – he predicts some “further headway” before the coming summer.
In the very near term, the stock market has become overbought and should correct, he warns. Regardless of whether the market is heading up or down, for now, volatility is likely to remain high and market swings of 20% or more within a month or two will recur with high frequency, he warns.
To justify an “intermediate positive stance”, however, the level would need to stay above the November 2008 lows of 741 for the S&P500, he adds.
As for currencies, for dollar-centric investors, the message is in Chinese: diversify, diversify, diversify.