Longview Economics warns of imminent sell-off in risk assets
Summary
Chris Watling, CEO and chief market strategist at Longview Economics, forecasts an imminent "big, chunky sell-off" in the markets, citing tightening global liquidity and rising risk premiums as key indicators. He draws parallels with previous turbulent years, such as 2018 and 2015, noting that market gains are becoming increasingly concentrated in a few stocks, which could lead to a broader decline. Watling attributes this potential correction, estimated at 10% to 20% on the S&P 500, to the recent shift in central bank policies from interest rate cuts to hikes, alongside stress in high-yield U.S. corporate bonds. He suggests that euro zone consumer staples could be a viable hedge during this period, as they are currently undervalued in the face of rising bond yields driven by capital expenditure in artificial intelligence and increased corporate debt.