Wall Street Banks Warn Downturn Is Coming

[RunInRed 16,385]

What do you think?  No end in sight for the bull run or the bears are coming?  What say you?

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HSBC Holdings Plc, Citigroup Inc. and Morgan Stanley see mounting evidence that global markets are in the last stage of their rallies before a downturn in the business cycle.

Analysts at the Wall Street behemoths cite signals including the breakdown of long-standing relationships between stocks, bonds and commodities as well as investors ignoring valuation fundamentals and data. It all means stock and credit markets are at risk of a painful drop.

“Equities have become less correlated with FX, FX has become less correlated with rates, and everything has become less sensitive to oil,” Andrew Sheets, Morgan Stanley’s chief cross-asset strategist, wrote in a note published Tuesday.

His bank’s model shows assets across the world are the least correlated in almost a decade, even after U.S. stocks joined high-yield credit in a selloff triggered this month by President Donald Trump’s political standoff with North Korea and racial violence in Virginia.

Just like they did in the run-up to the 2007 crisis, investors are pricing assets based on the risks specific to an individual security and industry, and shrugging off broader drivers, such as the latest release of manufacturing data, the model shows. As traders look for excuses to stay bullish, traditional relationships within and between asset classes tend to break down.

“These low macro and micro correlations confirm the idea that we’re in a late-cycle environment, and it’s no accident that the last time we saw readings this low was 2005-07,” Sheets wrote. He recommends boosting allocations to U.S. stocks while reducing holdings of corporate debt, where consumer consumption and energy is more heavily represented.

https://www.bloomberg.com/news/articles/2017-08-22/wall-street-banks-warn-winter-is-coming-as-business-cycle-peaks

 

[homersapien 11,362]

I plan to set up a CD ladder this week for part of my portfolio, even if for a relatively small part (20%).  Wish I had done it a couple of weeks ago during the all time high when I first thought of it.

Trump's presidency has got me worried.  Especially regarding trade, which has the most potential to cause a crash. 

But yeah, the market goes up and the market goes down.  It's not really something younger folks should worry about though. Far better to stick with it and wait out the dips instead of trying to anticipate them.  

But I am only 6 years away from mandatory distributions.