A 10-12 percent correction could hit the U.S. stock markets in the first or second quarter, says market economist Peter Cardillo. He sees a flat performance for the S&P 500 next year.
Stocks they don't want to rally despite this surprise drop in existing home sales for more we're joined from the floor of NYC with by Peter card Dello. He is chief market economist at first standard financial. Peter what supporting investors' sentiment today at all bottle. Now I think so you know I think what's really supporting investment sentiment today is the gross domestic product. In spite of the fact that it was revised slightly lower. It was a solid report. You know there were a lot of headwinds live in this quarter but yet restore consumer spending and we saw this is spending holding up. And of course you know inflation is still very much contained. And so I think that the report suggests. That we're going to see continued modest solid growth. And that probably means that the Fed is not likely to be aggressive in raising interest rates in future months but. Here's how they gel with the existing home sales number that we got today that was the biggest drop in five years a surprise drop it that. Om is is this a warning sign for the economy you see the optimistic based on the GDP report. No I don't think it's a warning sign you know over the past five to six months we have been getting some mixed results in terms of the housing market. And you know existing home sales. Probably is reflecting the fact that. Prices are quite high as certain. In areas of the country and as a result of that I think. It could also be attributed. To send seasonal factors this time of the year. And so I just think that that ones that we saw. Could be a temporary factor and Peter you don't when he sixteen what sectors are you bullish about. Well I like mid to smaller cap stocks. I would suspect that. Once we get into the new year. That. What the economy. On fairly solid footage. That the stock that was sold off the especially. In the mid to smaller cap arena. Probably will rally I think we'll have the January effect and so. That's what I'm look at looking at right now we'll when he is the channel samples aren't that rallies he. Well I think you know the January effect is going to be based on economic growth now that doesn't mean that. We could have a sour market in the first quarter. You know we're headed for fourth quarter earnings and I don't think you'll be anything get to write home about we'll go I don't think we're gonna see. Earnings that are gonna pull off a cliff. But by the same token. We've had some three. Declines over the past. Thirty thirty to sixty days and so a lot of the PE ratios. Have been cut substantially. So I think any. Negative earnings sentiment. It would be. Short lived. All right CC. Stocks not coming back your market economist what do you see in terms of economic growth of next we're 2016 and in terms of stock or this be fun on. Well I think it's going to be basically a flat year in terms of BS and 500. That's not to rule out perhaps that we could closed 2016. Around when he 300. I think we're probably headed for a correction. Sometime in the first though maybe. The second quarter of the 2016. May be anywhere from ten to 12%. And then after that I think we have a gradual climb and that's going to be based on. Solid. And that's going to be based on modest solid growth. Arguably watching so correction possibly in the first or second quarter thanks what you're doing it's my pleasure our thanks to Peter cargo. Up for standard financial I'm Fred Katayama and this is.