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Albert Edwards (SocGen): "This is a rally before the real bear market"


Albert Edwards, the well-known strategist of Société Générale (SocGen) Nicknamed the 'always bearish' for his negative views on the market, he considers that the stock market recovery since the March lows is just a rally caused by extreme overselling which will be followed by further steeper falls in the bags.

"The stock market recovery is raising hopes among investors that the worst of the bear market has already passed. We, like many others, suspect that this is nothing more than an initial stage, a rally within a bear market before the actual bear market begins"he explained in his last report.

Edwards sees bearish markets starting with a sharp and rapid decline, followed by an oversold bounce that nullifies part of the initial correction. Finally, there is a more sustained decline, at a slower and more exhausting rate, as fundamentals deteriorate. "We are in stage 2," says this expert.

"For those who hope we have overcome the worst of this bear market, the indicators suggest that the stock market still lacks technical resilience," he adds. In relation to what is probably a very deep recession, "the equity market and the yield curve have barely budged yet"he concludes.

In his opinion, investors' fear of staying out of the current rise, called FOMO (fear of missing out) in English, it will cause great pain to retailers entering the market now. "These are extraordinary times, especially when the authorities have transitioned to a permanent and total monetization of government deficits. And although I don't rule anything out, it would seem incredible to me if it turns out that the stock market has already hit rock bottom"he argues.


During the last days, in the heat of the incredible movements that the bags have made, different evaluations have taken place on the part of the most important analysis firms in the world. One of the most optimistic has been the American bank Morgan Stanley, when considering that the bags they made soil in March and that it is time to take advantage of the opportunities generated by the great correction in March.

"Forced liquidation has passed. With unprecedented monetary and fiscal support and high capital risk premiums, we maintain our view that the worst is behind us"According to his assessment, the current levels are purchase points in a horizon of 6 to 12 months.

"We're not saying we're going to go straight up from here, and there will likely be a pullback after the last rallyHowever, their base scenario is that March lows are the lows for this bear market for most stocks.

By contrast, Citi analysts are far from optimistic. Jimmy Conway, strategist specialized in actions of Citigroup Global Markets, considers that the current rebound of Wall Street and European stock markets is nothing more than "a reply" to the earthquake that shook the markets during the first two weeks of March.

"I think we are only seeing a replica of traders trying to manage risk while exactly analyzing the depths of this recession and evaluating whether the amount of support is sufficient," he added. His conclusion, in line with that of Albert Edwards, is that "the market will go down further" and that Wall Street will set new lows below those registered in March.

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