Markets tumble but analysts look for year-end rally

Markets fell on Thursday.

The S&P 500 tumbled 1.4 percent and the STOXX Europe 600 fell 0.5 percent. Earlier in Asia, the Nikkei 225 fell 0.8 percent and the Shanghai Composite plunged 2.9 percent.

While many analysts see continued volatility ahead, some remain sanguine for the longer term.

Bruce Bittles, chief investment strategist at Baird, said that “so far this looks to be a correction that could carry further, setting up the possibility for a year-end rally later on”.

Ryan Detrick at LPL Research said: “Importantly, markets can be jittery ahead of major events like elections. Once the uncertainty is resolved in November, solid fundamentals and strong seasonals could take over for a nice year-end rally.”

Analysts at JP Morgan led by Dubravko Lakos-Bujas wrote in a note that an earnings-related pause in corporate stock buybacks is contributing to the stock market’s October selloff. “With the largest one-way buyer returning in size to the market post earnings, we expect liquidity to improve and equities to move higher,” they wrote.

Other analysts are less optimistic.

Steve Grasso, director of institutional sales at Stuart Frankel, said that if growth stocks continue to fall, “that's the end of the bull market right there”.

Rich Weiss, chief investment officer of multi-asset strategies at American Century Investments, said: “Cash is still in the running to be king, if not this year, certainly next.”