It is a severe correction but not heading for a bear market: Peter Cardillo, Spartan Capital

WALL STREET, AFFECTED BY THE RESULTS OF COMPANIES, TUMBLES
October 25, 2018
Denver Radio Interview
October 29, 2018

It is a severe correction but not heading for a bear market: Peter Cardillo, Spartan Capital

Unless we lose 20% plus, I do not think we are headed for a bear market, Peter Cardillo, Chief Market Economist, Spartan Capital, tells ET Now.

Edited excerpts:

What is the market mood looking like? Maybe the headline numbers on growth look good but the internals do not suggest that the momentum is here to stay?

The markets right now are going through a pretty severe correction. I say severe correction because the fact that the Dow managed to lose all the gains this year and of course, the S&P fell rather sharply over 3% suggests that this market erosion is going to continue.

There are several factors for this; the main one is that we are beginning to see tariffs impact earnings even though some of the companies have reported earnings matching expectations.The fact is the guidance they are beginning to sell the alarm that prices are going up and that means either the companies pass the increases on to the consumers or they have to absorb them and that means lower earnings.

So that is a basic fundamental. Then of course, there are geopolitical concerns between US and the Saudis, the announcement of the wage book. The Fed had been rather upbeat but this could change the outlook for the economy. I think that was also a factor. In fact, the market began to accelerate on the downside after the announcement of the wage book. There are key fundamental reasons why the market is now in a corrective phase.

Do you think this is just the beginning of a larger decline for developed markets and equities in general?

I do not think it is just the beginning but I do not see the end in sight anytime soon. Can we go down another 5%? Even 10% is very possible. Remember that we have been up substantially and so unless we lose 20% plus, I do not think we are headed for a bear market.