Stock Market Correction: Market Bear on 6 Charts to Watch – Business Insider

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  • Société Générale strategist Albert Edwards warns ‘maximum greed never ends well’ in a new report.
  • Edwards, who predicted the dot-com crash, highlights the mounting concerns from strategists.
  • He shares the 6 charts and signals he’s watching that indicate the potential risk of a correction.
  • See more stories on Insider’s business page.

The bulls are continuing to run rampant in the markets. On Thursday, the S&P 500 hit another record high close bolstered by strong technology earnings. 

Now, with the Federal Reserve once again stating its commitment to keep interest rates low and provide liquidity to the market, the question is whether anything will slow this bull rally down?

According to a new report from UBS, 41% of investors are considering increasing their holdings in stocks over the next six months, compared with 12% who are looking to reduce them.

Market events also continue to resonate with a mainstream audience from the Gamestop short squeeze in January to the cryptocurrency and non-fungible token frenzy in March.

Just this week, Shark Tank investor Mark Cuban went on mainstream daytime TV’s “The Ellen DeGeneres Show” to discuss the merits of Dogecoin, a joke cryptocurrency that has surged 119% in price over the last year.

Yet, some pockets of the market have started to see a slow down. Barclays released a new report this week that highlighted a decline in trading brokerage usage as lockdown restrictions started to ease in the UK.

Chart of UK retail investor time spent on trading and brokerage accounts from Barclays April 28 research note
Barclays

Bitcoin (BTC) also recently experienced a significant decline of around 17% after hitting an all-time high following the listing of the cryptocurrency exchange, Coinbase. And the SPAC boom, which was seen as representation of current market euphoria, has officially peaked according to a new JPMorgan report.

Warnings about potential market corrections have also started to grow from market strategists. 

Bank of America’s US equity strategist Savita Subramanian expects a 9% correction in the S&P 500 by the end of the year, according to an April 14 note. 

Her colleague Michael Hartnett, Bank of America’s chief investment strategist, told investors to leverage the “pain trade” in preparation for a tougher market environment after analyzing current bull and bear market cases.

Sven Henrich, the founder of NorthmanTrader, recently explained why he believes the stock market is currently in a bubble, while John Hussman, the president of the Hussman Investment Trust, warned stocks could drop 25% to 35% in the near-term. 

Now, Société Générale’s strategist and perma-bear Albert Edwards is joining the list of market-watchers increasingly worried about fundamentals. 

“Maximum ‘extreme greed’ never ends well,” he said.  

“We all know that investors have decided that US equity valuations don’t matter anymore – a stance usually forced upon investors in a bull market when equity market levels can no longer be justified by any sane valuation model,” said Edwards, in the note.

We broke down the six indicators Edwards cited in his April 22 report that he is watching and in turn, that investors probably should be watching too.

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