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Pros Say: Expect 15% Pullback Before Recovery

The rally on Wall Street began to fade Monday, with the S&P and Nasdaq turning negative, after a global rally that had spilled over into U.S. trading this morning. Read and listen to what the pros had to say...

Expect 15% Pullback Before Recovery

"Unfortunately, we see a W-shaped recovery, both in the equity markets and in the economy," said Emily Sanders of Sanders Financial Management, adding that we're on "the top edge of the 'W' right now."

Counterpoint:

"Stocks are overvalued in our opinion," Sanders said. "The good news has been overinflated and we will see a 15 percent retracement in the Dow and S&P before things start leveling out and can truly start to recover."

Second Opinion:

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Stocks Could Rally 10-15% by Year-End

Investors should continue to buy on the dips in the stock market because there could be a further 10 to 15 percent rise before the end of the year, said Daniel Vassall-Adams from Helvetia Wealth. He thinks that the economic data will continue to bring positive surprises and retail investors will start switching out of corporate bonds and into equity funds.

Time to Buy the Markets

"Things look bullish on most stock markets," said Royce Tostrams from Tostrams Groep. He said that last week the markets formed a higher low, signaling a "buy."He sees the Dow “easily” hitting 12,000. “Things [in the U.S.] look very positive,” he said.

Recovery Will Equal Slump

The economic recovery will be of equal force to the slump and there is currently a vacuum between production and consumption, said Peter Toogood from Old Broad Street Research. “It’s still a 'V-shaped' recovery…the downturn was deep and the recovery will be the same.” There’s still a lot of money on the sidelines waiting to participate in the market, he added.

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Economy Likely to Keep Recovering

There is a risk of further economic weakness, but the global economy is likely to see subdued economic growth going forward, said David Page from Investec. “We’re hopeful that the economy is going to bounce back.” From the Federal Reserve’s point of view, "we expect to see a continuation of policy as it stands. We expect to see further credit easing," he said.

Need a Weak Economy for Stock Rally to Go On

We need a weak economy for stock markets to continue to rally, said Roger Nightingale of Pointon York. "It's with the weak economy that you get easy money and low interest rates, and it's with—in this situation—a relatively weak economy that you get satisfactorily strong profits." Between now and 2 to 4 years, we will get very modest growth, he said.

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