Beware of TV Economists Bearing Doomsday Forecasts: Carson's Detrick

A major stock selloff is unlikely in the near term despite this month’s market pullback,  according to Ryan Detrick, Carson Group’s chief market strategist, who predicted equities will reach new highs before year end.

“You might hear some economist on TV with a bowtie telling you the end is near, but if the credit markets aren’t worried, I’m not worried,” he said.

Credit markets are showing little stress, which generally is a good sign for the economy and stocks, Detrick said in a column Wednesday on the firm’s website.

“We think credit markets have some of the smartest investors in the room, and if they aren’t worried, the weakness in the market likely won’t get much worse and may offer an opportunity to add to equities,” he wrote.

Detrick noted investor fear has risen with recent market weakness, which he said he had expected as a seasonal pullback.

September could prove tricky as well, he wrote, “but with credit markets showing very little stress, we don’t expect a major stock meltdown like so many on TV keep predicting. Instead, we remain overweight equities and do expect stocks to make new highs before the year is done, it just might take a little more consolidation first.”

Credit spreads show how much extra interest over Treasury rates investors demand from companies that want to borrow money, the strategist explained. 

“If investors believe a recession is imminent, they may expect lending to companies to be more risky and hence demand higher interest rates. In other words, if there was a monster under the bed the credit markets would likely show it,” Detrick said. But spreads are tight now, while in past recessions they soared, he wrote.

The stock market may break recent lows and officially tag a minor pullback of 5% or more, he said, but there’s “major support just beneath current levels.”

Pictured: Ryan Detrick