Leading stock market strategist warns of “nasty decline” in coming weeks, something that could spell trouble for the ASX 200

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Mark Hulbert has said the U.S. stock market’s five-month rally is coming to an end, saying conditions are strong now for a stock market correction.

As the old saying goes, whenever Wall Street sneezes the Australian share market catches a cold, meaning if Hulbert is correct, the big rally in the ASX 200 index could also soon be coming to an end.

Writing on Marketwatch, Hulbert says the timing on his bold call is uncertain, admitting he previously expected the stock market could retest March’s lows in mid-June and mid-August.

Hulbert lays out a couple of main reasons why his thinks the stock market could suffer “a nasty decline in coming weeks.”

  1. Short-term market timers have become extremely bullish, which Hulbert says is not a good sign from a contrarian perspective.
  2. Hulbert says there is almost always a market decline over the three months prior to presidential elections. Upon examining data going back to 1900 he found that between mid-August and Election Day the Dow at some point in that three-month period was more than 5% lower than where it stood in mid-August, on average.

Soberingly, Hulbert points to August 2008 – an election year – where despite market timers being upbeat, in the subsequent 60 days Lehman Brothers would collapse and almost bring down the entire global financial system.

The ASX 200 index has soared 34% higher since bottoming in March this year.

Contributors to this article may own shares in some of the companies mentioned in this article. The Capital Club has a thorough disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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Bruce Jackson has 30 years of hands on investing experience. He is passionate about stock market investing, running his own portfolio and SMSF. His focus is on small cap growth stocks. You can contact Bruce at brucej@thecapitalclub.com.au