Royal Bank of Scotland: “Sell Everything”

January 12th, 2016 by

We’ve been hearing a crescendo of dire warnings about the deteriorating state of the global economy from more and more corners of the mainstream media. This has especially accelerated since the beginning of the new year thanks to the staggering losing streak for risk assets around the world since the calendar hit January 1st.



But the Royal Bank of Scotland (RBS), one of the world’s largest investment banks, now sees “cataclysmic” trends in place that are reminiscent of the financial crisis of the not-so-distant past.

“Cataclysmic Year”

In a recent note to its clients, RBS offered a dire warning about the state of the global markets in 2016. RBS analyst Andrew Roberts suggested, simply, “Sell everything except” the safest assets in your portfolio. That means dump stocks and any securities, pull your money out of Wall St—in short, time to cash out. Roberts said plainly, “We think investors should be afraid.”

panicThis is not the first time that a big firm has made such a warning over the last few years. However, the frequency with which big investment banks and financial management firms like JPMorgan, RBS, and others have issued such bearish warnings has rapidly increased over the last 18 months. Under normal conditions, this is unheard of: These firms are in the business of getting you to invest, not advising you to take your ball and go home. RBS may as well be saying, “Get out of the game.”

A confluence of factors inform the apocalyptic outlook given by RBS: falling oil prices; uncertainty and high volatility in China; a slowdown or contraction of global trade; rising levels of debt; weakness in the corporate bond market; and, of course, deflation. Together, each of these threats spell the possibility of a full-blown global meltdown.

What to Make of It

market-crashA detail that’s worth noting is that big investment firms are not solely in the market of selling financial products and services. These firms own finance departments are actively playing the markets themselves. Hence, you can be sure that if these banks are telling their clients to sell, the banks themselves have already gotten out of the market. In some ways, the steep and persistent losses for managed money and stocks to start 2016 could reflect the big institutional players stepping off the train before it crashes.

Another interesting dynamic that goes on somewhat beneath the surface, or at least below the attention of many market participants, is how the inferences and potential fallacies that generate market sentiment are a bit of a self-fulfilling prophecy. For instance, as people see markets go down (as they have to start this year), more of them think to pull their money out of that market. As a result, even more people become aware of the funds flowing out, and now all of them head to the exit—which pushes the market even lower . . . and so on and so on.

We could see this very kind of chain reaction because RBS issued its doomsday warning, or the analysts at the bank could be absolutely right. In either case, it might be advisable to take cover and steer your money toward safety.


The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.