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Veteran strategist David Roche warns markets could be at a ‘turning point’ toward a bear market

Veteran strategist David Roche warned the recent volatility could be pointing toward a bear market, rather than a temporary speed bump in a continued bull run.

“What we’re in the process of seeing is not a minor interruption in a bull market but perhaps a turning point towards a bear market,” Roche, president and global strategist at Independent Strategy, told CNBC’s “Street Signs Asia” on Monday.

He explained that “all the good factors” that drove economies during the pandemic — such as government financing of both household and corporate balance sheets — are set to be “slowly withdrawn.”

Meanwhile, supply side disruptions in labor markets means that worker incomes are not going to replace the money that previously came from public authorities, the former global strategist and head of research at Morgan Stanley added.

“So, because this is so important with what drove financial markets — excess money chasing insufficient assets — I would say we’re about a quarter of the way through the education of the punters,” Roche said.

“There is practically nobody in the business left except me — which tells you about my age — there’s nobody left who actually remembers what a bear market is really like,” he warned. “People really only remember buying on dips, that every time anything went down, pain threshold of central banks was quickly reached and they reverse policy if they were tightening.”

Wild January for stocks

The long-time strategist’s comments follow a wild January for global markets as investors grappled with a range of issues: from major central banks like the U.S. Federal Reserve potentially tightening monetary policy, to ongoing geopolitical tensions between Russia and the West over Ukraine, as well as worries over inflation.

In Asia, markets in Japan and mainland China’s Shenzhen were in correction territory or worse by the end of January. Over in Hong Kong, the benchmark Hang Seng index sits in bear market territory, with the city’s markets currently closed for the Lunar New Year holidays.

On Wall Street, the S&P 500 and tech-heavy Nasdaq Composite posted their worst months since the onset of the pandemic. Elsewhere, European stocks also saw their worst month since October 2020 in January.

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