Recently there have been quite a few pullbacks on the US stock market and last week there were a couple of scary moments. According to John Manley, chief equity strategist at Wells Fargo Funds Management, that does not mean we are at the dawn of a bear market.
Optimism on the market
This is not what the start of a bear market feels like. To be able to speak of a bear market, the market actually has to go down strongly in combination with widespread optimism. The drop we saw last week in US stocks would not have happened if almost everyone was optimistic, in John Manley’s view.
Manley also added that the development of a new bear market takes a few months. If he looks at the recent months and years, he sees sharp intermediate drops, which are a reflection of fear. That is why Manley calls them ‘bull market crashes’, caused by people who state that they are bullish, but are easily scared by the smallest problem. Although it might sound crazy, the strategist says it is a good thing.
Until the Federal Reserve starts raising interest rates and the economy starts slowing down as a consequence, Manley will remain bullish on the US stock market. Earnings remain a point of discussion in the US, however.
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