Deutsche Bank sees a "significant pullback" of up to 10% in the $4 over the next 3 months.- The firm's chief equity strategist expects stocks to fall as macro growth indicators peak.
Deutsche Bank's chief equity strategist is expecting a "significant pullback" of up to 10% in the $4 over the next three months.
In a Monday note a team of strategists led by
But Chadha sees economic growth peaking soon, and historically that peak has correlated with stock declines. The strategist expects a significant stock consolidation between 6%-10% as economic growth peaks over the next quarter.
Chadha explained that stocks have historically traded closely with indicators of cyclical macro growth like the
"With a strong correlation between equity performance and cyclical growth indicators, it follows that a decline in the ISM from its peak should see equities sell off; and the bigger the decline, the larger the equity selloff should be," Chadha added.
Deutsche Bank's economists forecast that ISMs will flatten out beginning in the second quarter and continuing into the third quarter.
Chadha also said that overall equity positioning is already elevated-which is unusual for so early into an economic recovery-and that supports a bigger-than-average historical pullback of up to 10% in the next three months.