Our last post, Overdue, but not Overdone, asserted that the bear market in stocks had come out of hibernation and that there was considerably more mauling ahead. Since then, stocks have performed as expected, selling off sharply. So is that it? Or is this leg down just getting rolling?
This morning’s Synthetic Systems update says the latter. In the upcoming third quarter, Synthetic Systems expects markets to reprise their first quarter act, with stocks declining and bonds and gold rallying. Interestingly enough, this outlook is not all that different than the 2020 Q3 forecast Systems made in last quarter’s update, and even the forecast at the beginning of the year.
In the second quarter now drawing to a close, markets unsurprisingly rebounded from the extremes seen in late March. Stocks were deeply oversold at the lows in March 23. What was not so expected was the length and strength of the rebound rally. Even in the second half of May and into June, as the economy resumed its deterioration, stocks continued to soar as enthusiastic dip-buyers overstayed their welcome and market pundits everywhere either tried to rationalize the rally or gasped in disbelief. I believe the disbelievers will have the last laugh. Synthetic Systems is looking for a low in stocks around the end of September.
In the spirit of a picture is worth a thousand words, rather than run on with more prose, at this point I’ll simply defer to the picture Synthetic Systems paints. As always, Synthetic Systems forecasts are posted on the Market Analysis page. Just click the link for the Quarterly Charts on the following page: