Pros Say 20-25% Market Correction Coming in a Month

Stocks on Friday were mixed despite news that the economy is growing ever-so-slightly. Investors have had to face a roller coaster of highs and lows recently as stock markets over-react seemingly to any news be it good or bad. Unfortunately, there seems to be general consensus that a bear market is looming and the stock market is in for a correction.

Investors should remain wary. According to many stock market analysts, the current dive in stocks in only an indication of things to come. The recession is indeed, not over, despite the Feds assurances that things are looking up. Jobs continue to be lost, the housing market remains in tatters, and stimulus plans do little but provoke argument.

New developments indicate that the stock market is in for a correction. In an interview with CNBC, Dan Deighan of Deighan Financial Advisors warned that the short-term may prove rocky for investors. Stocks have overshot their prices and ought to go back down.

This is particularly jarring news for investors who were enjoying the rocket like rise of stocks that are at rock bottom prices. Bank stocks are favorite investor bet. Banks like Citigroup, Bank of America and local banks naturally took a hit with the financial meltdown. However, government sponsored loans, namely TARP, and bailouts rallied investor confidence. Stocks that were once $50 a share and now are $3 a share looked quite enticing.

Unfortunately, according to Deighan, a 25 to 50 percent drop is on the horizon. Moreover, it won’t be something that takes a long, slow time to develop. The drop will occur swiftly and abruptly. He thinks it’ll occur within a month.

Why another drop? Deighan blames bonds. The housing market has already led to a death grip on credit, leaving Americans to rethink their spending habits and lifestyle. Now, it’s only a matter of time that other effects of the credit crunch start popping up.

The bond market in the US has been pushed to the forefront as Greece’s continuing budget problems have forced the country to sell off a large percentage of government issued bonds. Greece is a member of the EU and its finances are a matter of world concern. A financial collapse of the country would have consequences across the globe including in the United States.

A bubble in the bond market is apparently about to burst. If this occurs, another correction is inevitable. Indeed, the picture isn’t pretty for the short-term investor, or the investor in general for that matter. The current mood is bearish despite optimistic news about the economy.

Despite, all the charts and technology, stocks are an unpredictable creature. Investors should heed the signs – the recession is not over and stocks will continue to correct themselves. History proves the stock market always does. In order to win in the stock market, it's just a matter making smart moves. Pigs get slaughtered. Don't be greedy.

Written by Lani Shadduck
HULIQ.com

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