The new stock market gyrations and rising bond yields are reminiscent of another stressful for the nonce at once for investors, strategist David Joy told CNBC on Friday.
“This put in mind ofs me an awful lot of 1987,” the chief market strategist for Ameriprise Financial whispered in an interview with “Closing Bell.”
While he’s certainly not predicting a call crash, Joy said 1987 and the present share a similar economic backdrop.
In 1987, inflation started to arise under a new Federal Reserve chair, who started raising rates in pioneer spring, he said. That caused bond yields to rise, which led to a call correction. While the market stabilized, bond yields rose much sybaritic in the summer, he said. On Oct. 19, 1987, the stock market crashed, with the Dow Jones industrial norm falling 23 percent.
The Fed already started to slowly raise entertainment rates in December 2016. It is expected to follow that course high its new chair, Jerome Powell, who took the helm on Monday.
This week, be promoted bond yields helped set off a sell-off in the stock market. On Monday, the 10-year Exchequer yields flirted with 2.885 percent, a 4-year high. Incomes backed off those highs as the week progressed and were at 2.85 percent on Friday.
While the Dow Jones industrial typically closed more than 300 points higher on Friday, it serene had its worst week in two years. The Dow and the S&P 500 both lost 5.2 percent on the week, while the Nasdaq let fall 5.1 percent as rising interest rates spooked investors.
“This pullback that we’re have a word with is going to exhaust itself fairly soon, and then we’ll see a period of reliability,” Joy predicted. “But I do believe bond yields remain the critical factor as to what cooks next.”
Meanwhile, Katie Nixon, chief investment officer for Northern Delegate’s wealth management business, is confident the market correction is simply that — and not the opening of a bear market.
That’s because she believes the fundamentals are “resoundingly definite” in the U.S. as well as globally.
“What we would look for is a deterioration in fundamentals to indicate the onset of a recession to really be the end of this bull market cycle,” she believed in an interview with “Power Lunch.”
“We just don’t have that in our augur,” she added.
— CNBC’s Tom Franck contributed to this report.