There was a lot of red on my screen Friday.We appear to be in the midst of a somewhat bearish and uncertain atmosphere.A third-quarter earnings slowdown appears to be the culprit. According to Thomson Reuters, the companies in the S&P 500 are expected to see a roughly 2.9% decline in earnings and a drop of 0.2 percent in revenues with six of ten sectors set to see declines.In fact the recent rate of negative pre-announcements was at a decade high.Many companies have sited the slower economic pace of growth in China, the weakness in Europe, the US fiscal cliff uncertainty or the strengthening relative value of the dollar as a source for weakness.Given this backdrop are we having a corrective and digestive pause or is this a turn for the worse?Despite the uncertain outlook, we feel the next major move with risk assets will be positive.There are a series of developments that lead us to believe the bull market could continue after any such corrective phase:* Sentiment Remains Horrible. I have touched briefly on this in prior columns but it bears repeating. This may be the most hated bull market in history. A day doesn’t go by when I hear massively negative comments on equities and even investing in general. The average retail guy has all but shunned the equity market based on equity flows. Investor sentiment as measured by the AAIIBULL survey out last week has plunged to 28, very near the level seen during the market low 20 in the March 2009 period! Recently, more positive US economic data, strengthening Chinese industrial production and ramping consumer confidence has done little to sway equity prices. When no one is happy it’s not likely to lead to a large correction or bear market.* Future Expectations Lowered. The bar is set relatively low at this stage. US GDP growth estimates for 2013 have come down from 3.2% to 2% even though US housing has shown some solid gains that portend to higher levels of growth and, according to Bank Credit Analysts, retail sales data suggests real GDP growth of 3%. Globally expectations have also been crushed. Europe is perceived to be in a depression for a very long time. Even China’s expectations (which I have questioned numerous times), have finally been lowered to levels where positive surprises can materialise. Earnings comparisons were very difficult in the third quarter and will get easier as we enter 2013. The point here is that there are less positive expectations baked into prices at this stage and if the US economy does firm up, China’s economy makes a bottom and Europe acts aggressive to stem dislocation; risky assets still have upside potential.* The Great Chase. Hedge fund managers who I have talked to want the market to go down. Why? Because they have underperformed horribly. The HFR Global Hedge Fund Index’s is up some 3% this year compared to global bond returns of about 5% and the FTSE All World index up roughly 16%. So what do you do when you are underinvested, lagging other areas of the market and are at risk of losing “hot money” assets? You chase. You chase hard. This means you start piling into risk to buoy returns and “catch up”. It’s pretty hard to justify charging 2% fees and 20% of profits a year if you aren’t beating bonds! This chasing and panicked buying has the potential to lift equities markets through year-end.As always, I view equities through the lens of a market of stocks and not a stock market. Pockets of consistent growth and innovation developed even in the worst of times. The key is to target those companies that offer compelling investment merit in sectors that are showing positive momentum. For these investments, at least, this would simply be a pause to refresh.