Will The Market Keep Climbing? Here's One Opinion. One Possibility. Do You Think It Is Possible?

BofA's Curry: 3 Reasons Stocks Will Fall 20 Percent Next Year

Thursday, 12 Dec 2013 07:49 AM

By Dan Weil

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Three factors will likely incite a 10 to 20 percent correction in the stock market next year, says MacNeil Curry, head of technical strategy at Bank of America Merrill Lynch.

First, there's the Treasury market, where he sees higher yields and volatility. "When all of the corrections [in stocks] transpired over the past year, it's been because of the Treasury market," Curry told CNBC and Yahoo's Talking Numbers.

"When Treasury yields have started to push higher aggressively, and as fixed-income volatility has risen, that has spooked [equity] investors."


The 10-year Treasury note yield hit a 12-week high of 2.93 percent Friday and stood at 2.8 percent early Wednesday.

Second, there's the age of the bull market — more than 4 ½ years, Curry noted.

"If you look at [stocks hitting] new 52-week highs, that has slowly been declining," he explained. "If you look at the percentage of stocks on the New York Stock Exchange trading above their 200-day [moving average], that is starting to decline." This signals slowing momentum.

Finally, there's seasonality. Stock performance tends to be negative in the second and third quarters, though that wasn't the case this year, Curry argued.

While stocks may not tumble next year, history argues against a strong gain.

The Standard & Poor's 500 has appreciated 20 percent or more in 23 years since 1927, according to Birinyi Associates, The Wall Street Journal reported. The next year it averaged an increase of 6.4 percent.

The S&P 500 has risen 26.4 percent so far this year.

 

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