Global bear market is just getting started & ‘the worst is yet to come’ – analysts

The situation with stock markets plunging into bear territory is set to worsen in 2019, experts warn. Their gloomy forecasts follow the wild trading that has gripped Wall Street and spread worldwide.

Major market risks remain, according to the analysts. They say that fears are mounting over the global economic slowdown along with the Federal Reserve’s possible further interest rate hikes and the US-China trade war.

“I would love to be more optimistic but i just don’t see too many positives out there. I think the worst is yet to come next year, we’re still in the first half of a global equity bear market with more to come next year,” Mark Jolley, global strategist at CCB International Securities, told CNBC.

Bear market is a general decline in the stock market over a period of time when overwhelming pessimism sparks a 20-percent drop or more from recent highs.

Jolley explained that the big risk lies in the credit markets. According to the strategist, with the Fed projecting to raise interest rates twice more in 2019, companies will find it increasingly difficult to service their debt causing some to default or get downgraded.

Such weakness in the credit markets will spill over to stocks, he said. “My core scenario will be a credit event, which will further weigh on equity markets, which will definitely weigh on high growth sectors like tech.”

The head of economics and strategy at Mizuho Bank, Vishnu Varathan, noted that investors have fewer reasons to be optimistic now because the Fed’s tightening of monetary policy means there will be less money for investments.

“There is really no conviction for markets to buy back because they’re not sure this is the bottom and so they are thinking this is the proverbial falling knives,” said the expert.

The trade dispute between the world’s two largest economies, the United States and China has often been cited as a major risk to global economic growth. While further tariff escalation is on hold until early-March next year, no one knows what will happen after that, said Vasu Menon, OCBC Bank’s vice president of wealth management.

“Valuations are looking attractive, but you’ve got to have a strong risk appetite because I think markets are going to be very choppy,” he added.

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