Nomura's Janjuah: Global Markets Set for Steep Plunge

Wednesday, 06 Nov 2013 12:22 PM

By Michelle Smith

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Prepare for global stock markets to peak and witness declines up to 50 percent, warns Bob Janjuah, strategist at Nomura.

Janjuah views the end of the current quarter to the end of the first quarter of 2014 as "the risk-on top."

Starting in the second quarter of 2014, markets are set to sell off 25 to 50 percent, he predicts.

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5 Phases of a ‘Retirement Heist’ Exposed (See Video)

"While my target for this high in the S&P over the next five months remains anchored around 1,800, an 'extreme' upside target could see the S&P trade up to 1,850," he writes in a note, ZeroHedge.com reports.

"I am looking — as a proxy guide — for the VIX [CBOE Volatility] index to trade down at 10 between now and the end [of the first quarter of 2014] before I would recommend large-scale positioning for a major risk reversal over the last three quarters of 2014 and over 2015," he adds.

But, he warns that an "interim sell-off" could be in the works in upcoming weeks. With the markets having already priced in optimism about growth, risk-off sentiment could creep in and take the S&P 500 from 1,775 to as low the as 1,600-1,650 range by the end of the month, Janjuah cautions, according to ZeroHedge.

Such a call is nothing new for Janjuah. In February, he wrote a note to clients issuing similar warnings of major plunge, Business Insider reports.

At that time, Janjuah did not believe there was "sufficient leverage in risk-on positioning, . . . to set up the conditions necessary for a major sell-off." Getting there would likely require another couple rounds of "buying the dip," according to Business Insider.

"A weekly close at a new all-time high would I think lead to the final parabolic spike up which creates the kind of positioning extreme and leverage extreme needed to create the conditions for a 25 percent to 50 percent collapse in equities over the rest of 2013 and 2014, driven by real economy reality hitting home, and by policymaker failure/loss of faith in 'their system," he maintained.

Janjuah's predictions, then and now, are based primarily on unwavering concerns about wasteful government largesse, "dangerously" loose monetary policy and excessive debt and market speculation.

The only solution policymakers in the United States and the United Kingdom have put forth for massive financial market and economic failures is more of the same of what caused the original problems, he argues. And that is "namely debt-driven consumption, debt-driven asset price speculation, and the expansion of the 'ponzi' that best describes our modern day economic 'model'," Janjuah explains in his recent note.

"The next five years HAS to be about a rebalancing towards the 'real economy' and the bottom 90 percent, at the expense of the top 10 percent," he adds.

Janjuah forewarned clients, "This shift in policy emphasis will not be a happy time for financial markets and speculators while the transition happens, but in the very long term will be seen as a major positive event."

Editor’s Note: 5 Phases of a ‘Retirement Heist’ Exposed (See Video)

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