RBS: Sell everything but high quality bonds

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The note is particularly bearish on China and global commodities, and predicts that oil could fall as low as $16 a barrel.
In a grim set of predictions, Andrew Roberts, head of European economics, rates & CEEMEA research said that the world has far too much debt to be able to grow well.

He also warned that advances in technology and automation are set to wipe out up to half of all jobs in the developed world.

The note says equities could fall 10% to 20%.

It predicts the year will be spent focusing on how to exit positions that have benefited from long-running QE, including emerging markets, credit and equities.

“The world is slowing, trade is slowing, credit is slowing, we are in a currency war, global disinflation is turning to global deflation as China finally realizes what it needs to do (devalue soon, and sharp) and the U.S. then, against ALL THIS countervailing pressure, then stokes the fire by hiking rates,” Mr. Roberts wrote.

While the Fed’s interest rate move last year suggests a positive outlook for the U.S., the ECB’s quantitative easing is having a powerful effect, and eurozone activity picked up at the end of last year, there are undeniable headwinds, not least from China, oil and commodities.

Mr. Roberts has been bearish on the global macro outlook since late November, and has since then has written in client notes of the similarities between now and the run-up to the financial crisis.

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