Some Experts Now Uncertain of Market Bottom

With stocks now worth less than 55% of their peak in October 2007—a decline of $11.1 trillion in market wealth—investor sentiment has been shattered and some market experts believe the process of finding the market bottom must begin all over again.

That’s a far cry from the outlook that BlackRock Chief Investment Officer Bob Doll had at the end of last year, when he and many other market experts were saying that the market had seen the worst. “We have broken down and, therefore, the repair process to create a bottom and to create a foundation has to start over again,” Doll told Reuters.

That said, in this week's market commentary, Doll likened the current economic conditions to the eye of the storm, saying that we are "in the midst of the worst of the recession" and that GDP growth in the first quarter could be even worse than the 6.2% contraction in the fourth quarter. However, the decline should lessen in the second quarter, flatten in the second half and return to positive territory in 2010, Dolll said.

Rather than serve as a lagging indicator, the mass layoffs we have seen in the past few months indicate that businesses don’t expect the economy to recover anytime soon, said Mohamen El-Erian, chief executive of PIMCO. “What today’s number tells you is forward-looking,” El-Erian said. “It tells you that even the profitable firms are shedding labor today in order to position themselves for a more difficult outcome.”

Jim Rogers, co-founder of the Quantum Fund, explained the dour new outlook well: “I don’t think the bottom is here. Maybe ‘a’ bottom but not ‘the’ bottom. The economy is going to get worse. You can’t have a good stock market without a good economy. Maybe you’ll have some kind of rally in the economy with all this money that’s going to get poured into it, but it’s not going to last. Unless the economy is on a sound and rising basis for a few years, you’re not going to have a good stock market.”