The recent global stock market uncertainty is characteristic of a normal bull market correction rather than a greater market malaise, according to Ken Fisher, head of Fisher Wealth Management (pictured).

He argues that ‘Like many corrections, the recent market movement has been fuelled by the markets’ inability to properly scale the magnitude of current circumstances. I like to refer to markets as “The Great Humiliator”, leading investors to act with folly rather than reasoning, acting on fears uncorroborated by fact. Perfectly normal market volatility has led people to view US sub-prime concerns, a handful of hedge fund failures and less attractive bond issuances as harbingers of a forthcoming bear market.’

Fisher adds, ‘However, we see extremely strong corporate balance sheets, very healthy earnings growth and record levels of cash generation at a corporate level. A shift in credit spreads from very low to normal is hardly the stuff of catastrophe, particularly in light of accommodative monetary policy from central banks around the world. All of this flies in the face of a supposed credit crunch and leads us to believe there is plenty of life in the current bull market.’

However, the negative impact of problems in the US mortgage market is likely to dampen investor sentiment for a while yet. Adi Sorber, portfolio manager of the ABN AMRO Funds’ Global Equity Fund, argues that ‘There is worse to come. Parts of the real economy are feeling the consumer’s distress from higher mortgage payments, a lack of home equity to draw on and tighter lending criteria.’

He adds, ‘For now, markets envisage nothing worse than a soft landing, but pressure points need to be watched closely. All eyes are on the US Federal Reserve as financial markets ask whether it will bail investors out of a bubble that they have created themselves. A US rate cut should certainly help sentiment in the financial markets, but it would be a poor reflection on the underlying issues and the real economy.’