Risk Appetite Will Soon Be Lost, Janjuah Says: Chart of the Day
Investors may be about to turn toward government bonds and away from stocks and other riskier assets, according to Bob Janjuah, global head of tactical asset allocation at Nomura International Plc.
This shift may begin by the end of the week, Janjuah wrote yesterday in a report. Yields on 10-year U.S., U.K. and German notes will be closer to 1.5 percent than 2 percent during the first quarter, he predicted.
The CHART OF THE DAY tracks yields on these securities since the start of last year, and illustrates his prediction. Yields on the 10-year Treasury note and its German counterpart fell below 1.75 percent, the middle of his range, in September. The U.K. note’s yield set a low of 1.955 percent last month.
The first quarter “is going to be extremely bearish for risk,” according to Janjuah, based in London. He cited the possibility that Greece may default on its debt before the quarter ends, along with other concerns.
Janjuah, who predicted last year’s second-half retreat in U.S. stocks, estimated that the Standard & Poor’s 500 Index may fall to 1,000 or lower this quarter. That would be a decline of at least 20 percent from last year’s close.
Appetite for risk may return next quarter, he wrote, as the Federal Reserve and the Bank of England buy bonds in a so-called quantitative easing and the European Central Bank possibly does the same. After that, he expects a second-half slump that sends the S&P 500 tumbling to 800.
To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
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