by Jacob Pramuk
1) Major geopolitical incident
2) Unwillingness to get away from "rates and equities"
3) The 60/40 portfolio
Source: CNBC
http://www.cnbc.com/2016/09/13/economy- ... 284a1255a1
1) Major geopolitical incident
2) Unwillingness to get away from "rates and equities"
3) The 60/40 portfolio
Central banks have created a bubble in the stock market, which will come down "very, very hard" when it finally prices in a series of Federal Reserve rate hikes
"There is one big bet out there. So diversification isn't really going to work. Timing this is not going to work," he said.
"These low rates and this high valuation means that they're extraordinarily sensitive to changes in rates, extraordinarily sensitive to risk premiums and growth."
"In fact, central banks are not in control. In many ways central banks are the tails wagging the dog," he said, pointing out that central banks' balance sheets are "minuscule" compared to the whole global and derivatives market.
BofA warns: “Latent risk remains worth monitoring, as
(i) leverage is still near max levels across a variety of risk parity parametrizations,
(ii) bond allocations are historically elevated, and
(iii) markets continue to be sceptical of a 2016 Fed hike”
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