Kerry Balenthiran: ‘We’re in a Long-Term Bear Market’

Friday, 15 Mar 2013 08:01 AM

By Michael Kling

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The Dow Jones Industrial Average will drop as much as 30 percent in a long-running bear market that’s about to begin, predicts Kerry Balenthiran, an expert in stock market cycles.

The bear market will continue until 2018 with the Dow at around 10,000, Balenthiran, author of “The 17.6 Years Stock Market Cycle,” told CNBC. The current rally will last for at least another few months, and stocks will start falling in October to November.

“My research identified long-term, 17.6-year secular bull and bear markets,” Balenthiran said. “We’re in a long-term bear market.”

Editor's Note:
Billionaires Dump Stocks. Prepare for the Unthinkable.

Balenthiran said he has examined the last 100 years of stock market cycles and identified mini-cycles within long-term ones.

“My cycle has identified bull market cycles of 4.4 years and bear markets are 2.2 years,” he said. “So 2013 is a low as well as in 2015 and 2018 and then we’ll see a long-term uptrend to 2035, but I see a lot of volatility until 2018.”

A turnaround in commodities may prompt the bull market in 2018, he noted.

“I’m expecting a peak in gold and commodities in 2015, but when that bubble bursts we get the low in 2015. Then there is a bounce and then a sustained uptrend once input costs go down year-on-year and consumers have more money in their pockets.”

The end of the enduring bear market in 2018 will offer a great opportunity for stock investors.

He explained that inflation and central bank intervention might impact the outcomes, but that he has a “high conviction” in his prediction.

Most economists disagree with Balenthiran. Few analysts predict a long-term bear market, although most are not sure how long the current bull market will last. For the time being, central banks are pushing investors into stocks by keeping interest rates low.

“This is a classic bull market, climbing the wall of worry. Valuations in the equity market are spectacular,” said Robert Tipp, chief investment strategist at Prudential Fixed Income, according to The Globe and Mail.

“Stocks are incredibly cheap. They are as cheap relative to bonds as they were in the mid-1970s,” he said. “They hit these valuations back in 2009 and the valuations have remained extremely favorable since then despite the higher prices, by virtue of the fact that the fundamentals have improved as evidenced by solid earnings growth.”

Editor's Note: Billionaires Dump Stocks. Prepare for the Unthinkable.

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