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RBS Tells Clients Sell Everything But Quality Bonds As Fear Builds

Jan 12, 2016 | Stock Market Outlook

The amount of fear in the markets continues to rise despite the VIX Index falling back today. Last night Chinese authorities announced a more “concentrated” effort to manage financial markets would be put in place and that seemed to help the Shanghai Composite Index as well as the Yuan.

It didn’t seemed to help oil prices which are back sliding again today.

Morgan Stanley Predicts $20 Oil

With Morgan Stanley yesterday forecasting oil will reach $20 a barrel this year the amount of fear for equities is rising rapidly.

Sell Everything But Quality Bonds

In a note to clients today Royal Bank of Scotland advised its clients to ‘sell everything’ but the highest quality bonds they have according to media reports today.

Shadow Of 2008 Stretches Into 2016

With images of the collapse of markets in 2008 well entrenched in many an analyst’s head, RBS predicted that 2016 will be a “cataclysmic year”.  Analysts indicated that the market conditions are similar to the months prior to the 2008 crisis in which stock indexes collapsed by over 50% with many stocks collapsing far beyond the index losing values.

RBS Predicts $16 Oil

They also called for Brent oil to collapse to $16.00 this year, a decline of over 50% from present prices and 20% lower than Morgan Stanley’s prediction.

Return Of Capital

RBS analysts wrote in their report  “This is about return of capital, not return on capital. In a crowded hall, exit doors are small.”

Not Just USA Is Indebted

RBS cited the collapse of Chinese markets which they believe could have a snowball effect on global markets and pointed to the high levels of debt China has accumulated when taken into context to their GDP. Yes, surprise, it is not just the United States, Canada or European nations that are heavily indebted as measured by GDP numbers.

Predicting 20% Decline

The bank predicted European and US markets could fall as much as 20% this year. A 20% decline on the S&P would place the index down at 1600 which would wipe out the gains of 2014 and 2015.

SPX Decline of 20% would be 1600

SPX Decline of 20% would be 1600

Oil and Mining Dividends Not Safe

They went on to say that people are thinking oil and mining companies dividends are safe. They indicated that people are “going to discover that they’re not at all safe.”


 

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