Could this year be the last call for the bulls?
Americas second-longest bull run in stocks on record will end by late 2018, when U.S. credit also will enter its first bear market since the global crisis, according to a Bloomberg survey of fund managers and strategists.
In an article on Bloomberg, a poll of 30 finance professionals on four continents showed a lack of consensus on the asset judged as most vulnerable now, with answers ranging from European high yield to local-currency emerging-market debt — though they were mostly in the bond world. Among 25 responding to a question on the next U.S. recession, the median answer was the first half of 2019.
The would-be end of a great cycle for financial markets would come just about when central bank balance sheet contraction is expected to kick into high gear. By mid-2018, the Federal Reserves wind-down may be well under way, and the European Central Bank might have joined the Bank of Japan in tapering asset purchases.
While none of the respondents signaled a 2007-09 style meltdown, even smaller-scale downturns have wreaked large-scale damage in the past. The 2002 bear market in U.S. stocks wiped out more than $7 trillion of value.
Consequences could be very painful, Remi Olu-Pitan, who manages a multi-asset fund at Schroder Investment Management Ltd. in London, told Bloomberg. We have had a liquidity-fueled bull market. If that is taken away, there is a pressure point, she said.
