Monday, 12 February 2018

Tighter monetary policy could lead to “big bear market”

The S&P 500 fell 5.2 percent last week.

While some investors are looking for a bottom to the sell-off, others are warning of a possible bear market.

“Our ongoing concerns about the recovery's tenure have been thrown into sharper focus by the steepest market sell-off since the credit crunch,” Eoin Murray, head of investment at Hermes Investment Management, said in a research note last week.

“Central bank tightening, or at least the end of post-crisis monetary accommodation, will undoubtedly prove challenging,” added Murray.

“The real issue is that we are at an inflection point in capital markets,” said Michele Gesualdi, chief investment officer at Kairos Investment Management, told CNBC last week.

Gesualdi said that an expected move to quantitative tightening in the summer would likely trigger increased market volatility and that a “big bear market” was on the horizon.

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