It is never a good sign when one or two of the major analyst banks from Wall Street announce that the markets are due for an upcoming major downturn. When three or more of them agree on this same gloomy prognosis though, you had better sit up and pay close attention. This past week, major analysts at HSBC Holdings Plc, Morgan Stanely, and Citigroup Inc. all aligned their positions with Bank of America Merrill Lynch from “buy” to “sell and run for your lives” for the first time since at least the Global Financial Crisis of a decade ago.
They are only the latest and most important worldwide players to join with two major global investors who are warning you to get out of the markets while you still can. Gold is your best, last, and only historically proven line of defense against a full-blown market crash. Now is the time to remind yourself the reasons for why a gold IRA as well as to seriously consider what gold in an IRA while there is still time. Gold protects against financial losses in market corrections. Brush up on how to invest in gold while there is still ample time to protect your investment and retirement portfolios.
The Major Analysts Warn that “Winter Is Coming” to the Stock Markets
The alignment of the major investment banking firms originally began with a milder warning from the analysts at all three investment banks HSBC, Morgan Stanley, and Citigroup a few weeks ago. They stated that it appeared as if the rally was about to run out of steam. Then the trio sharpened their warning by saying they saw mounting global evidence that worldwide stock markets are in the final stages of their impressive rallies before hitting a severe and upcoming downturn in the business cycle.
The trio of investment banks cited such signals as the complete breaking down of long-term relationships between commodities, stocks, and bonds. Investors have begun to completely ignore the all-important value fundamentals as well as the data. They concluded that this means a painful drop and risk abounds for both stock markets and credit markets. Andrew Sheets the Chief Cross Asset Strategist at Morgan Stanley vocalized this best of the three with his:
“Equities have become less correlated with FX, FX has become less correlated with rates, and everything has become less sensitive to oil.”
Morgan’s model reveals that the global assets have become their least interrelated in nearly a decade. This occurred despite the fact that American stocks and high yielding credit markets both sold off in August in the wake of the U.S. President’s nuclear standoff with North Korea. This graph below helps to visualize the deteriorating situation for U.S. and worldwide markets:
Just this past week, the three major global investment banks ratcheted up their rhetoric yet another notch. They pointed to conditions much like those which led to the Global Financial Crisis in 2008 to warn that a so-called “Winter Is Coming” for all of the financial markets on planet earth. Specifically, investors have simply been ignoring important economic reports and releases such as manufacturing data, much as they did in the second half of the 2000’s until things finally fell completely apart. Sheets continued his ominous warnings with:
“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 2005-2007.”
Sheets is referring to the fact that investors are again pricing various assets according to the risks inherent with only a given industry or an individual security, and ignoring bigger data drivers at their peril. Traders are simply looking for any reason to stay bullish at this point and time. Morgan Stanley further warned that such a dynamic has held the global volatility in currencies, stocks, and bonds in check, increasing the global risk asset appetite to outright dangerous levels.
Now rival investment banking operation Bank of America even agrees with Morgan Stanley on some of its prognostications for the equity markets. Analysts at the owner of Merrill Lynch have taken note of the fact that those firms which have outperformed both sales and profit estimates are not being fairly rewarded by crazed investors. This is the only time this has occurred since the middle of the 2000’s.
It represents yet another indicator that the present bubble is preparing to pop. In fact the numbers only continue to worsen with decreasing corporate profit margins and other key financial indicators continuing to demonstrate that the present economy is in the late stages of the current business cycle, exactly as Morgan Stanley warned earlier. Frankly put, what it means for you is that a severe recession is lurking around the next corner.
HSBC and Citigroup Analysts Concur with Morgan Stanley For the First Time in A Decade
Steven Major is the global head of fixed income research at British investment banking giant HSBC Holdings. He sees the decreasing stock market volatility as a bad thing:
“Low volatility across asset classes may give a false sense of security and bond markets may be caught napping. Years of international spillover from quantitative easing increase the risks that local triggers will have a greater impact on global markets.”
Making for a perfect storm of agreeing major investment banking analysts (and most unusually), Citigroup strategists agree with arch-rivals Morgan Stanley and HSBC Holdings for the first time since the Global Financial Crisis of 2008.
Citi’s people are worried that the governments’ various efforts to flush through massive amounts of economic stimulus after the 2008 Global Financial Crisis have now created a new crisis and worrisome setup with their easing endeavors tapering off. These could combine with various other factors to create the next global recession.
“Citigroup analysts also say markets are on the cusp of entering a late-cycle peak before a recession that pushes stocks and bonds into a bear market. Spreads may widen in the coming months thanks to declining central bank stimulus and as investors fret over elevated corporate leverage.”
Bloomberg analysts Cecile Gutscher and Sid Verma similarly warned about investors that:
“They’re looking at the relationships between stocks, bonds, and commodities— and they’re worried people may be ignoring fundamentals. 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.”
When Asset Classes Stocks, Bonds, and Commodities Are All In For A Catastrophic Fall, Only Gold Can Save Your Portfolio
When the three major global investment banking analysts actually come to a single severe position on the future of most financial assets around the world, there are not many places remaining in which to hide from the rapidly gathering storm. Gold is the only historically proven, time-tested asset hedge that safeguards. Gold protects in times of trouble.
You should review the Gold IRA rules and regulations now while you still can. The G20 can’t fix the world’s real and critical problems, and as history has already proven on more than one occasion they certainly cannot prop up the global equities and bond markets forever. After all of the various investors around the world begin to trample one another in a mad dash for the proverbial exits, it will be too late to acquire your share of the ultimate global safe haven gold then.