“We have adjusted tactically to the somewhat more nervous market sentiment and have returned all our positive signals to neutral. This includes corporate bonds in the United States and in Europe, as well as emerging-market and Asia credit. It may be some time before investors’ appetite to seek higher returns replaces the caution triggered by the coronavirus.”
Currency Rethink
Nomura Holdings Inc. has flipped some of its top currency calls for 2020 just a month into the year. It recommends long dollar positions against Thailand’s baht and the Chinese yuan. Back in December, shorting the greenback versus these low-yielding Asian currencies was among its key trades for this year. Nomura is also advising selling the Singapore dollar against a basket of its trading partners.
“We may go into high-yielders like India and Indonesia once the global external backdrop begins to stabilize a bit,” said Craig Chan, Nomura’s global head of FX strategy in Singapore, on Monday.
Beware Complacency
Investors should rein in risk, JPMorgan says. The bank’s strategists trimmed their overweight call on equities to 5% relative to a benchmark allocation, from 7%.
“We are reluctant to chase short-term momentum,” strategists wrote Wednesday. “Instead, we tactically trim the risk of our portfolio further.”
Over at Citigroup, the strategy team is warning about a sense of euphoria and “substantive” complacency in financial markets, when the impact of the coronavirus is not yet clear.
“Pretty much every client we talk to wants to buy the dip, and that is not comforting,” wrote Tobias Levkovich, the bank’s chief U.S. equity strategist.
Buying Opportunity