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Next Market Correction Could Be as Bad as 2001

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(Kitco News) - The next bear market is coming and it could be on the same scale as past recessions, including the one in 2001, this according to Bob Thompson, senior vice president and portfolio manager at Raymond James.

About "40% to 50% is normal, as far as market drops are concerned for the general markets," Thompson told Kitco News. "Nobody can believe it, but that's just the normal sort of event that happens at the end of any bull market... ."

Thompson said that current market conditions resemble the overvalued stock markets around 1999-2000 when investors keep adding money into risk assets, and especially into companies that may not necessarily be profitable.

"Value stocks, anything that is non-high growth and that includes the mining shares, are getting overlooked," he said.

He noted that bull markets tend to be protracted and meet a lot of downside support before prices pull back for a correction.

"The stronger the bull market, and this has been one of the longest ones in history for the U.S. market, it's hard to kill a bull, especially since it's been going so long," he said. "You got to put a lot of swords in the bull at the end in order for people to realize that the bull market is dead and I think that's where we are right now."

On mining, Thompson maintained that we are still in the opening innings of a bull market, but it will take some time before markets come to a consensus on this.

"I think a lot of the people are talking about the mining sector right now, and it's less and less, as each year drags on there's less and less believers, I think the market's going to rally that much more when it does, because people forget this is a cumulative effect here. The longer this drags on, the more the supply destruction in the metals, the greater the bull market will be when it happens."

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This article is commentary by an independent contributor. At the time of publication, the author held TK positions in the stocks mentioned.

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