Crazy headline or spot on prediction? Just trying to grab attention you may be thinking. However based on the recent rapid moves in the market, mainly to the downside, this headline may come to pass sooner than you think. I have a reasonable investment and retirement portfolio, so I hope that this mark is never reached – but I am planning for it. Here is what some analysts are saying about the future implication of yesterday’s massive drop in the Dow and the S&P 500’s biggest single-day percentage decline since Black Monday 1987. Scary stuff.
- “I don’t just think we’re going to test the lows. I think we’re going to violate them and break lower in a big way,” said Kent Engelke, managing director at the brokerage Capitol Securities Management, in Richmond, Va. referring to the possible fallout in the broader economy from the credit crisis, he said “We don’t yet know what that is, because this situation is so unprecedented. Every road sign has been obliterated.”
- “Even though the banking sector may be returning to normal, the economy still isn’t. The economy continues to face a host of other problems,” said Doug Roberts, chief investment strategist at ChannelCapitalResearch. “We’re in for a tough ride.”
- Stampede of Selling: Traders said some fund managers are unloading stocks to raise money for redemptions from investors burned in the recent selloff. “We continue to see a vortex of selling, led by a levered, scared hedge fund community stepping on each other trying to get in front of the other guy to liquidate, based upon the real investment losses that they’ve experienced, coupled with the threat of year-end redemptions,” said Doug Kass, president of Seabreeze Partners.
- “There can be no doubt now that the economy is in recession,” Ian Shepherdson of High Frequency Economics wrote in a note. “It will be there awhile.” “Stabilization of the financial markets is a critical first step, but even if they stabilize as we hope they will, broader economic recovery will not happen right away,” Federal Reserve Chairman Ben S. Bernanke said in a recent speech. “Economic activity will fall short of potential for a time. The housing market continues to be a primary source of weakness in the real economy as well as in the financial markets, and we have seen marked slowdowns in consumer spending, business investment and the labor market. Credit markets will take some time to unfreeze.”
- Retail Sales Crash: The retail sales report, released by the Commerce Department, showed that automobile sales took the biggest hit last month, falling about 4 percent. A broad range of products sat unsold in stores as well, including furniture, electronics, and clothing. At department stores, sales fell 1.5 percent. “There is almost nothing positive to say about these figures,” Rob Carnell, an economist at ING Bank wrote.
- “It’s absolutely trading on fear right now and uncertainty, because nobody knows yet how bad the economy is going to get,” said John Wilson, the co-director of equity strategy at Memphis, Tennessee-based Morgan Keegan, which manages $120 billion. “It’s disquieting to me, and I’ve been doing this for 35 years.”
- “I’m pretty sure that if I go all in right now, I’ll be better off in the next six months, but boy, I’ll lose some sleep,” said Morgan Keegan’s Wilson. “There’s always that little nagging voice that says, `What if it’s different this time?” My thoughts exactly!
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