What Sam Stovall calls a “mega-meltdown” and others call a recession is likely to end by the fourth quarter of 2009, suggests S&P’s Stovall, though it won’t be much of an upturn then, though “we may be at a nadir for the market now.” In fact, says Stovall, the chief investment strategist at Standard & Poor’s and a long-time member of Investment Advisor’s asset allocation panel, “we possibly hit a bottom on March 9.” We got to the bottom, he pointed out to the wealth managers and high-net-worth investors in attendance at the inaugural Wealth Forum on April 1 in New York’s Yale Club, by producing an -8.6% return for the S&P 500 in January, and another big minus month, -11.3%, in February. The numbers show that this bear market is the second worst since 1929, Stovall reports, and the worst is not over: S&P expects unemployment to peak at just below 10% by the middle of this year.
Speaking at the Forum sponsored by the Wealth Management Exchange, Investment Advisor and Wealth Manager magazines, Stovall also suggested that “investors likely will be moving back into equities by the fourth quarter” of this year, as the “get whiffs” of improved corporate earnings. Despite the scent of improved earnings, Stovall said “we are probably seeing another down year for the S&P 500′s operating earnings.”
Another speaker at the Wealth Forum, Leo Prohowski, the CIO at BNY Mellon Wealth Management, agreed that “right now, we’re in the most intense weakness” of the recession, but he discerned signs that the Administration’s stimulus plan is “gradually beginning to stem economic deterioration,” that credit market conditions are “improving,” and the “deleveraging process is becoming more orderly.”
Like Stovall, Prohowski pointed out that while all seems gloomy on the growth front in the U.S. and other developed countries, “the powerful macro forces at work in places like India and China will continue.” Finally, he expects that the jobless rate in the U.S. will increase to 8.5% for March–figures due to be announced April 3–up from 8.1% for February.