The advice of Andrew Roberts, head of European Economics at RBS, has today gone around the world: its time to sell, ahead of a stock market crash. The RBS European rates research team said that things all "looks similar to 2008.” It seems to cap a bearish round of forecasts: Standard & Poor’s, the credit ratings agency, has more companies on a negative outlook than at any time since the last crash. Are we due another one? The fill document of the RBS note is here (pdf). And the edited highlights below:-
I think my ‘severe downside for the world’ call is looking ok so far. The fact that we are going well is very dangerous for every investor in the world. Why? We posited a negative outcome in the Year Ahead, risks for which were very high, and massively underpriced, with consensus on its usual ‘goldilocks’’ platform. What we are now seeing is those risks now playing out. That is the problem. It is not lost on me when something goes from a forecast, to an actual outcome.
The downside is crystallising. Watch out.
Sell (mostly) everything.
Since we published this Year Ahead on 24 November 2015:
The world is in trouble. Our net rationale in six bullet points:
The key though, is the actual backdrop. What counts is that the world is slowing, trade is slowing, credit is slowing, we are in a currency war, global disinflation is turning to global deflation as China finally realises what it needs to do (devalue soon, and sharp) and the US then, against ALL THIS countervailing pressure, then stokes the fire by hiking rates.
China trying to grab market share of (shrinking) world trade leaves every corporate facing tougher conditions, a cheapening competitor selling their wares at a lower prices. This is now starting to happen in sharp fashion. And the key for the rest of the world is simple – and always has been.
Sell mostly everything
Sell everything except high quality bonds.