'We've already corrected': Experts believe stock markets will soon begin to recover
By RYAN GORMAN
Experts say that Wednesday's sharp stock market declines are indicative of a correction, but believe the bottom is near.
The Dow is down more than two percent on the year, and nearly 10 percent from last year's high-water mark. The S&P is actually up 0.8 percent on the year and the tech-heavy Nasdaq is up 0.9 percent, but both are only a few sharp declines away from being considered in correction.
The Dow Jones Industrial Average dropped Wednesday by 460 points during the trading day but recovered to record only a 1.1 percent (173-point) loss. The S&P 500 also dropped significantly, but clawed its way back to only a 0.8 percent drop.
This week's dramatic selloff confirmed the suspicions of many traders and other market observers.
"The average stock is down almost 10 or 15 percent, if not more," Neil Azous, managing member and founder of Rareview Macro, told AOL News. "We're either in a technical correction or a bear run."
A "bear run" means market sentiment is skewed towards the negative. A "bull run" would send markets higher.
A decline of 10 percent is considered a technical correction, but many stocks are already down significantly on the year, even if the market indexes haven't caught up.
"Sentiment is no longer 'if this is a correction,'" said Azous. "We've already corrected."
The stocks dragging the markets down include energy, materials and industrials, which Azous says is a sign there may be a broader slowdown in the global economy.
Some energy stocks were down as much as 40 percent during Wednesday trading, but they were able to rebound towards the end of the session.
Market contrarian Matt Gohd, of Wallach Beth Capital, has been forecasting the downturn since the beginning of last month.
"I've been Mister Negative since the beginning of September," he told AOL News. "Nobody would listen."
Both he and Azous agree this correction will linger in the range of about 10 to 15 percent.
"After this kind of move, it's not the beginning of a major turndown, it's the end of the event," said Gohd.
Markets have been rattled by ISIS and Ebola fears, but that those factors are no longer sinking sentiment.
"All these events that are going on are known at this point," said Gohd.
This year's previous bull run was fueled by low interest rates and quantitative easing, which sees the government buy troubled assets from banks and other organizations in an effort to reduce their burden.
Quantitative easing is a drastic measure usually seen as a last resort. Rumors of the policy coming to an end have been growing louder as of late, but the government has made no such announcement.
A recovery will likely happen when crude oil begins to rebound from unusual losses for this time of year, according to Azous. But he would not venture a guess as to when that may occur.
Crude oil prices normally rise with demand as winter sets in, but increased U.S. production has created a glut of supply, and lower prices.
Azous and Gohd both stressed that a correction is normal and healthy. Markets often correct when stocks are priced high due to speculation.
The markets are trending slightly downward during Thursday trading.
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