The wild trading that’s gripped Wall Street may be no ordinary correction.
According to Ned Davis Research’s Ed Clissold, a bear market is officially here.
“If you take this as a typical bear market, not associated with a recession, it’s going to take you down around 20 percent — maybe a little bit more,” the firm’s chief U.S. market strategist told CNBC’s “Futures Now” last week. “That’s what we need to be thinking about over the next several months.”
A bear market is defined as an environment when overwhelming pessimism sparks a 20 percent drop or more from recent highs.
In this case, it would wipe out 588 points from the S&P 500‘s all-time high of 2940.91 hit on Sept. 21. The index closed Friday in correction territory at 2,633.08. That’s down 10 percent from the high and 4.6 percent for the week.
Originally, Clissold called for a bear market to hit Wall Street in 2019, due to jitters over interest rate hike risks, U.S.-China trade tensions and slowing growth in earnings and the economy.
However, he decided to move up his forecast due to “severe” technical damage from the October correction. Now, it appears the market may soon get hit with another batch of discouraging news.
“Earnings growth is becoming a front-burner issue. Everybody expected it to slow down next year because we don’t have the benefit of tax cuts. But the slowdown is probably going to be more than expected,” said Clissold.