RBS sell everything Advice To Investors

Investors face a “cataclysmic year” where stock markets could fall by up to 20% and oil could slump to $16 a barrel, economists at the Royal Bank of Scotland have warned.

In a note to its clients the bank said: “Sell everything except high quality bonds. This is about return of capital, not return on capital. In a crowded hall, exit doors are small.” It said the current situation was reminiscent of 2008, when the collapse of the Lehman Brothers investment bank led to the global financial crisis. This time China could be the crisis point.

RBS sell everything

RBS sell everything

As CNN points out, Morgan Stanley warned this week that oil could touch $20 a barrel. RBS says if it falls below $30, then $16 is on the horizon.

The world is in a global recession, Roberts wrote. This terrible cocktail means investors should now be thinking about getting a “return of capital, not return on capital.”

RBS compares the market mood with that of 2008 before the collapse of Lehman Brothers and the start of the global financial crisis.

Bears Out in Force

Although RBS’s note is particularly gloomy, it’s not the first bank to kick off the year with a series of bearish predictions on the world economy:

  • JP Morgan on Tuesday became the third bank to push back its forecast for the timing of a Bank of England rate rise, joining Goldman Sachs and Bank of America Merrill Lynch.
  • Morgan Stanley wrote in a note on Monday that oil prices could fall a further 10% to 25% if the dollar continues to strengthen.
  • Other major banks including Bank of America Merrill Lynch, Barclays, Deutsche Bank, Societe Generale and Macquarie have also cut their oil forecasts in the past week. Standard Chartered in fact said it could fall as low as $10 a barrel, but that’s not its main price scenario.
  • Ratings agency Standard & Poor’s has more companies on a negative outlook than at any time since the financial crisis.
  • A survey published by M&G and YouGov on Tuesday, based on data collected in the final quarter of 2015, shows that U.K. consumer inflation expectations are at their lowest level in three years.