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.
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.