European stocks are no longer enjoying the Goldilocks scenario that sent them higher in the wake of the credit crisis, and the market now faces three bears, which are likely to drag it lower, Mark Holden, head of equity strategy at Vestra Wealth, told CNBC Tuesday.
"I think we're at a major potential turning point in markets," Holden said. "If you go back to that time a month ago, you almost had the perfect environmental backdrop for investing in equities, a so-called Goldilocks-type scenario."
Low inflation, low interest rates, better-than-expected earnings, rising earnings expectations and an increase M&A activity all added to make the "Goldilocks" scenario, according to Holden.
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The last month has seen a "wobble" in the markets, Holden points out. Some poor economic data out of the U.S. and efforts by the Chinese government to slow down its lending boom, have raised "big question marks about the sustainability of the global recovery," he said.
"The Goldilocks scenario is being questioned. In the background we've had three bears for a long period of time," Holden said.
Holden says the "baby bear" is political interference including Germany's ban on short selling and the European Central Banks bailout package for the banking system.
Because of the level of political interference, it makes valuing companies and markets in general "extremely difficult," he said.
The other two bears are the move toward austerity measures and the risk of a European nation defaulting on its debt, which could ultimately lead to the break up of the euro, he said.
Even though government measures are on the whole inflationary, the overall weight of the three bears is deflationary, according to Holden.
Holden said if the three-bear scenario plays out it will be very bad for stocks, but potentially good for long-dated government bonds.