We don’t need to tell you that the market is booming — the retail investor explosion has taken over the news cycle in recent weeks. It’s a bold signifier of the bullish run we’re in the middle of. However, every bull run meets its bear. So is a market correction coming? And if so… when?
Market analysts are clashing over whether or not this raging bull will live through 2021. Some see the tech bubble ready to burst, some see precious metals as only just heating up.
So what are analysts saying about a coming market correction? Let’s take a look.
The Case for a Bull Run in 2021
Wharton professor Jeremy Siegel is the poster-child of a Wall Street bull, and this year he sees no reason to believe in a market correction just yet. “We’re not in the ninth inning here,” Siegel had to say of the market. But what about inflation? Although Siegel says lifting Covid-19 restrictions will bring about inflation, he does not think investors need to worry. In fact, he says stocks can rally through a period of inflation because they are more attractive options now than holding bonds or cash.
Another issue that could forebode a market correction is in President Joe Biden’s proposed tax hike, which calls for raising the corporate tax rate to 28%. Yun Li of CNBC who is bullish on 2021 has cited the S&P 500’s March bounce back as a signifier of a continued bull rally, and says tax hikes are nothing to fear. Li also cited a Wells Fargo analyst, who writes that even in the midst of tax hikes, record fiscal spending and economic growth will greatly soften the blow.
In other words, while inflation and tax changes do pose risks to the market, bulls think there is no reason to fear a market correction now.
Bears: Warning of a Market Correction in 2021
Blackstone analyst Byron Wien is one of the many experts who are warning investors of a looming market correction. Unlike Siegel, Wien worries that inflation might not be far off. And, while he says we might be able to, “shrug it off,” he still advises investors to plan ahead. Wien believes that inflation will rise faster than what calculators are predicting, and that the Federal Reserve will squeeze monetary policies tighter. While the chain of events and the selloff that follow are looming according to Wien, he believes that the coming correction will prelude further upswings for the market.
Finance expert Suze Orman sees the current bull market as highly reminiscent of 2000 and 2008. Alongside the dot-com bubble and the housing bubble, Orman sees the tech bubble as ready to burst. She is warning investors that such a correction could be coming sooner rather than later. However, her bottom line is important for investors to note. While she wants investors to be cautious, she does not recommend panic-selling. Rather, she advises investors to see a market correction as a great opportunity to buy stocks at a discount.
So what is the takeaway here?
Analysts are obviously quite divided on the issue, and we don’t know for sure if a market correction is coming. Investors should just be aware that this conversation is popping up. At the end of the day, even the most bearish on Wall Street believe the resulting rebound after a market correction will be very productive.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article.