Haywire global markets have Citigroup suggesting investors have to begin taking a bearish slant on risk.
Citi strategists on Thursday outlined four tactical trades they have within their portfolio, using the basic premise being short plays made to take advantage of safe haven inflows and much more money piling from risk assets.
Being more bearish in the present market may not be an awful idea for investors, since market drags such as China and crashing commodity prices are weighing on returns.
Speaking of China, Citi recommends shorting china yuan offshore prices and receiving the China five-year bond among its bearish plays.
The Citi portfolio includes a brief play against the Australian dollar versus the Japanese yen.
In the rates market, Citi recommends investors go long, whereas speculators have gone bearish on even short-term rates.
“Our bias is still to think core bond yields trade below forwards and in this respect we believe we’re strongly from consensus,” Citi strategists said in a note. “For example, twelve months forward 10y UST yields are about 2.3% and consensus has end year 10y USTs at 3%. We believe yields may drift sideways to reduce from current levels even if, and when, the Fed hikes. Curve flattening is more likely on Fed action than higher yields.”
And if those plays don’t work? Citi recommends investors short equities outright.