Forget the new normal – get ready for an enormous amount of “no normal” this season where traditional asset relationships are decoupling, economic growth is elusive and volatility is back with a vengeance.
‘Sell everything,’ global banking giant tells investors and brace for ‘cataclysmic year’
Markets are flashing the same stress alerts because they did prior to the Lehman crisis in 2008, warns RBS, predicting that global stocks could fall by a fifth and oil bottom at $16
U.S. Treasury yields have shot down once more, even as the Fed is now in rate raising mode. Typically, investors flock to gold when equity prices drop, but the price of the metal has decoupled from stocks over the past year. Gold has only recently shown signs of being a safe haven again, gaining US$100 in the past eight trading days, after remaining largely stagnant in the last three tumultuous months.
Meanwhile, investors have made it clear that stocks, especially once favoured U.S. stocks, aren’t market darlings. The Dow Jones Industrial Average plunged 364 points, or 2.21 per cent Wednesday, as the S&P 500 shed 2.Half. Both indices are off a lot more than seven per cent to date this season.
The wild swings claim that global markets, like the global economy, are set to see growing imbalances and volatility this year.
“Perhaps we have just hit a new normal or concept of normal just does not exist any more,” said Kathleen Boyle, md of worldwide equity research at Citigroup.
Some managers have begun referring to the chance American stocks in particular often see a bear market this year. It’s an unexpected decoupling, since U.S. economy is one of the few bright spots of worldwide growth.
Maybe the idea of normal just does not exist any more
“This is a capital preservation environment, not really a money making environment,” said Jeff Gundlach, CEO of bond house DoubleLine Capital in his quarterly presentation.
Gundlach warned that the U.S. is currently in a “stealth bear market”, where many stocks have now fallen 20 percent or more, even while the broader market has yet hitting that mark. Also, he cautioned that full-on bear markets tend to follow in the wake of the stealth market.
Bronka Rzepkowski, senior global strategist at Oxford Economics, said that this season will probably see a year of “volatility peaks” as investors ponder if the bull market in stocks, now in the seventh year, is near its end.
“2016 is set to determine relatively meagre equity returns worldwide because of weak global earnings growth outlook and unappealing valuations of stock markets,” said Bronka Rzepkowski, senior global strategist at Oxford Economics in a note.