Wall Street Pros Explain Falling Stock Market
Strategists are still betting on a stock correction rather than crash. Either way, cheap valuations just got even cheaper
"My advice would still be to sell down to a level of comfort.... This is still the second-longest period in Wall Street history without a 10 percent correction. It suggests we're overdue for the kind of correction that we've seen, and it could turn out to be healthy for the market. We have already sold down to our level of comfort. We've dropped our invested position down to less than 50 percent. The rest is in cash. Today we're sitting in our highest cash position since the last bear market ended in 2002."
Robert Doll, chief investment officer of global equities, BlackRock: "First, a point of context: The equity market, from its high, is down 5 or 6 percent, but it was up 25 percent roundly from July lows of last year to July highs of this year. So while it seems like the world is ending, we need to provide that perspective for people. It's down in the last few weeks, but up a bunch from a year ago.
"A lot of what is going on is de-leveraging and de-risking of portfolios. The genesis of that was the mortgage problems, in the sub-prime residential real-estate mortgage market.... The long and short of it is, throughout the system, risk has become a bad word after having been a good word for the prior period.... The question going forward is, 'How long does that last, and what impact does it have on the real economy?' While we don't know the answer to either question, our belief is that we are well into this, meaning there could be some more, but we believe there is more behind us than there is in front of us.
"There will be some impact on real economy, but we don't think that means the economic cycle is over.... Overall, the U.S. economy will continue to grow at a below-trend level. We're going to hobble along, below what we've been used to but still at an acceptable pace."
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