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Mark Mobius, executive chairman of Templeton Asset Management Ltd., believes that the global stock market will fall by up to 30%. The strong rebound following last year's calamity is likely to be impeded by profit-taking on the upswing. Basically, an increase of 70%, he says, will lead to a decrease of 20 to 30%.
The greatest risk in a recovering stock market comes from the increase in new stock and bond issuances, Mobius says. To participate in these new deals, investors would have to liquidate existing positions, which can put downward pressure on the market as a whole. Money doesn't come from nowhere, and new capital will come on the backs of the previous investments.
When will the drop occur? According to Mobius, it could occur "anytime, probably this year." And it may not happen in one shot. The decline could come from a series of market drops around the world. So, the next dip could sneak up on investors as limited periods of profit-taking are interspersed with relative calm.
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