Despite strong fundamentals and support for high-yielding, cash-rich equities, the stock market will not be immune when the risk-off beast roars, according to Philippe Gijsels, the head of research at BNP Paribas Fortis Global Markets.
“Whether we like it or not, in 2011 we have entered a multi-year period that is structurally less favorable for equities,” said Gijsels in an interview with CNBC on Monday.
“Technically we can still label the current move as a correction from a very overbought condition,” he said.
Looking back at major stock market corrections since the turn of the century, Gijsels believes downturns take between 2 and 3 years to play out and predicts this time will be no different.
“Nowhere is a stable, tested long-term bottom to be found. It also means that we are in a long-term trend of structurally lower valuations,” said Gijsels.
In the commodities marketGijsels believes there is a lot of hot money chasing returns, as witnessed by a 10 percent drop in oil prices in a single session last month.
“Logically the commodity complex is also suffering in the current 'risk-off' move," Gijsels said. "Gold is behaving just like another commodity and less like a safe haven. However, this status can, as we know, change at any time."