The markets appear becalmed as Asian and European stock markets hold steady and US markets rebounded on Monday. However, last week’s dip in to correction territory say analysts and experts is not yet over.
It's the speed of the bounce back too that is spooking some. Here’s a roundup of what a few market experts have said about where the stock market stands:
Robert Shiller, professor at Yale School of Management and a Nobel prize winning economist says open question. Speaking on Bloomberg TV, Shiller said “there has been a wide-spread conviction that markets are overpriced and are due for a correction.”
Shiller said people had been waiting for a sign querying when that correction was coming. The answer appeared last week as volatility engulfed markets. As to whether this recovery is here to stay and the bull market resumes is less defined. Shiller added that it’s ambiguous whether it's a bear market on the way or whether it will stabilise and go up. The question becomes according to Shiller whether we are satisfied the bubble is over: “Are we done with this sell spirit or not? And that is still an open question.”
Miles Eakers, chief market analyst, Centtrip warns improved risk sentiment unlikely to last.
Eakers said that following last week’s losses and Monday’s lift to global stock markets, this week will shift to what economists argue was the catalyst behind the sell-off and spike in volatility.
Eakers contends that “inflation data from the UK, Germany and particularly America are likely to drive the price of global government bond yields and with it risk sentiment.”
He adds, “With growing anticipation of increased inflationary pressure, government bond prices have fallen. This, in turn, caused volatility to spike, driving equity prices lower. Should US inflation data for January, due to be released on Thursday, show prices have risen by more than 1.8%, we expect bond and stock prices will fall further.”
Oliver Jones, economist at Capital Economics argues the sell off may have a bit further to go:
“At face value, this suggests that there is plenty of scope for them to continue to fall. What’s more, we think the recent cyclical rise in Treasury yields has further to run, even if yields peak at a much lower level than they have done in past tightening cycles, as seems likely.
Jones added. “The US budget deal reached last Friday only adds to the risk of higher Treasury yields.”
Finally, Lori Calvasina, chief equity strategist at RBC, remarked on CNBC that the shake out was probably good for shaking up complacency and sees it as the bottom. "These corrections are happening faster than they used to," she said. "On election night, people sort of looked and said strategists got it all wrong, but it did go down. It happened in the futures. It happened overnight. It happened overseas, and it happened really fast."
Looking forward Calvasina spots one unknown that may have an enervating effect and it's the new Federal Reserve chairman, Jerome Powell. Although, he is seen as likely to stick to Janet Yellen's policy agenda Calvasina still sees him as an unknown entity and said. "I think the issue is people don't want the Fed to move too fast," she said. "I think maybe it's not a coincidence that this is happening at the same time we have a leadership change. I think people are going to watch the economic data closely. It has to be in the context of the economy doing okay."