If your intuition is being defensive, then our message should be well-received.
Nothing overly alarming, but we squarely observe that Markets are now lead by moves in:
- China Commercial Paper
- China Real Estate
- Yuan/USD rate
- Yen/USD rate
Therefore, please pay more attention to China now. As mild de-risking continues, we advise switching to a more defensive positioning:
- Trim US Equities
- Buy longer duration G7 Bonds (alert since Dec 28, 2016)
- Buy longer duration EMM Bonds – Turkey, Mexico. Our model also likes Turkish Lira and Mexican Peso – so both currencies offer nice Yield and a likely FX appreciation.
- Buy Gold (alert since Jan 17, 2017)
- Buy more Growth-oriented equities (broadly speaking – Technology & Biotech)
Don’t get me wrong, the world is largely fine, but based on many indicators that we track, we are almost certain, you would be able to re-enter your positions better later.
In your view, what are the most under-appreciated risks to the Market now?