Stocks may see ‘correction’ of 10%, Marc Faber says

Tuesday, 07 April 2009 11:17 Share this Digg Del.icio.us StumbleUpon Netscape Yahoo Technorati Googlize this FacebookExport PDFPrintE-mail
Global stocks may drop as much as 10% in a “correction” following gains in the last four weeks, before rebounding after July, investor Marc Faber said. The Standard & Poor’s 500 Index may decline to around 750 before further gains in July, Faber, 63, said in a Bloomberg Television interview in Singapore. That’s a drop of 10% from yesterday’s close. Stocks in the US and other global markets are unlikely to fall below their October and November lows, he added. “After the rally since March 6, we need some kind of correction, maybe around 5 to 10%, and after that we can maybe rally more into July,” said Faber, the publisher of the Gloom, Boom & Doom report. “The economic news, while it won’t be good, the rate of getting worse will slow down.” Faber on March 9 advised investors to buy US stocks, saying government actions will boost equities. The S&P 500 has since rallied 25% from a 12-year low through last week, the steepest rally since 1938, as rising home sales and durable- goods orders signal a bottoming in the US economy. Gains may be halted by unemployment, consumer debt and concern banks will be forced to write down more loans. Faber told investors to abandon US stocks a week before 1987’s so-called Black Monday crash and said in August 2007 that US shares were entering a bear market. The S&P 500 peaked at 1,565.15 in October of that year before retreating as much as 57%.

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BANKSFaber said he had bought some commodity producers in November and is now less favorable on these companies with some stocks more than doubling. He has also bought some bank stocks and predicted that Citigroup Inc. shares could “easily rebound” to around US$5 a share from US$2.72 currently. “The rebound potential for financials is quite high,” Faber said. In Asia, stocks offer “much better value” than US shares, and investors should seize the opportunity to buy the region’s equities on “every setback,” he added. “If you buy Asian equities in the next three months, over the next five to 10 years, for sure you will make money,” Faber said. Faber is less favourable on bonds, saying they are entering a “long-term bear market” that can last for the next 15 years to 20 years.