Caz timing guru Griffiths: Market low will come in 2012

Robin Griffiths, Cazenove Capital’s technical strategist who predicted the precise date of the last bear market, believes investors have a one-month window to take risk off the table as a double-dip in the US economy is almost inevitable.

Speaking at the Citywire Wealth Management forum, Griffiths said the US market will bottom out by 2012 but before than it will be testing the lows last seen in March 2009. Ominously, he added a double-dip in the US economy was such a certainty it was ‘baked in the pie’.

Griffiths draws on the work on economic cycles pioneered by Joseph Schumpeter, an Austrian economist. The theories suggest that with secular trends investors can expect four and 10-year trends to take place.

The worrying thing for the Western world, Griffiths said, is that we have been in secular downtrend since 2000, meaning both the four and 10-year cycles are negative.

He said: ‘History shows that these cycles are bigger than the politics. Politicians are a part of the cycles and they can bend them out of shape a bit but they can’t override them.

‘History also shows that credit bubbles always end up with a double dip and a depressionary scenario. While the depression won’t be all over America, it will be in locations like Detroit, and places like Detroit are a big enough part of the US to cause a double dip.’

Secular downtrend

Following analysis based on Schumpeter models, Griffiths said the US long-term cycles are in a negative phase and will remain negative until 2012. That means there is one more fall to come before the market becomes cheap again, and with the indices having risen so sharply over the past 12 months, he argues the only way is down.

‘The markets in secular downtrend have also just had a strong rally. It is just over one year old now and is still going strong. History reveals that this rally has been one of the strongest ever of the last 100 years. The typical rise has been between 50% and 70% depending on the market followed. The depressing thing is that after that considerable rise the indices are still down between 25% and 30% on where they were 10 years ago. There is not only a possibility but rather a probability that the low will be at least as low as last March’s low.’

Griffiths said the only technical force that is keeping the markets up at this moment in time is ‘seasonal deviation’.