Asia-Pacific News

It's the End of the 'Cheerleading Rally': Strategist

CNBC.com
Share

The sharp global slump in stocks Monday was a sign that the markets are on their way back to reality after about five months of strong gains, Kirby Daley, senior strategist at Newedge Group, said Tuesday.

VIDEO5:2105:21
Markets Set for Meaningful Correction

Unlike previous selloffs that saw late-session rebounds, Monday “didn’t see the mysterious end-of-day ramping up and buying that we’ve come to get used to since this cheerleading rally began in March, with the green shoots, etcetera,” Daley told “Squawk Box Asia.”

A 10 to 15 percent correction would return the market back to reality and “eventually we’re going to have to revisit the (year’s) lows,” he said.

There’s a “massive difference” between moving out of a recession and economies staging a meaningful recovery, he added.

Global markets were dented by a sharp drop China stock prices, but that doesn’t mean a Chinese rebound will lead to a new rally, Daley said.

“There have been a number of times China has sold off in a vaccum,” he said, adding that the nervousness in Shanghai is based on overvalued stock prices compared with fundamentals.