RBS issues bear market warning
Posted on 13 August 2009 with no comments from readersThe only major city analyst that I can recall getting the crash last summer right is warning his clients to sell out before a third and devastating down leg hits the market. As The Daily Telegraph reports:
Bob Janjuah at Royal Bank of Scotland is advising clients to take profits in global equity and commodity markets and prepare for another storm as winter nears. “We are now in the middle of a parabolic spike up,” he said in his latest confidential note to clients.
“I expect this risk rally to continue into – and maybe through – a large part of August. What happens after that? The next ugly leg of the bear market begins as we get into the July through September ‘tipping zone’, driven by the failure of the data to validate the V (shaped recovery) that is now fully priced into markets… a move to new lows is highly likely…”
The RBS guru sees the correction taking around three months to bottom, taking us to November. He advises cash or German bonds to sit out the crisis.
Exit now
However, I would be wary about leaving an exit to the last minute. Market timing is notoriously difficult and once you have decided on a new direction then best to move rather than risk missing the boat.
Not sure I can see much power left in the rally. Yesterday’s uplift was pretty weak and last Friday’s top is pretty much in place. The middle of August is a good time to slip out of stocks.
Do the bulls imagine a great buying opportunity is coming up? Stocks look very expensive and the recovery story is wearing thin as the more realistic alternative of a long, slow bottoming out process becomes clear. Financial markets need a third and final shake-out now and RBS has got it right again.
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On Friday August 14, 2009, 10:24 am EDT
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NEW YORK (AP) — Stocks fell sharply Friday as investors worried that nervous consumers will short-circuit the economic recovery.
Traders were disappointed by media reports that the Reuters/University of Michigan index of consumer sentiment fell sharply in the first part of this month, a sign that consumers may continue to curtail their spending as they worry about losing their jobs. Consumer spending is crucial for the economy to emerge from recession as it accounts for two-thirds of all U.S. economic activity.
The discouraging reading came a day after the Commerce Department reported an unexpected decline in retail sales. Investors were able to shake off that reading, but Friday’s consumer sentiment number had them bailing out of stocks and moving their money to the relative safety of government bonds. Treasury prices rose sharply, pushing their yields lower.
The Labor Department said the Consumer Price Index was flat in July after a slight increase in June. Inflation is bad for bonds because it eats into their fixed returns over time.
Meanwhile, the market shrugged off a report showing a bigger-than-expected increase in industrial production. Investors have come to expect an improvement in manufacturing activity; their concern now is the consumer.
In early trading, the Dow Jones industrial average fell 137.55, or 1.5 percent, to 9,260.64. The Standard & Poor’s 500 index fell 15.35, or 1.5 percent, to 997.38, while the Nasdaq composite index fell 32.47, or 1.6 percent, to 1,976.88.