After Selling Stocks, 'Wait for Capitulation': Strategist
CNBC EMEA Head of News
Having gotten out of stocks in April this year, one strategist is warning investors not to increase exposure to them until "the real selling capitulationtakes place," and gold and the Swiss Franc begin to decline.
“We think that the markets are overreacting in terms of economic slowdown,” Bruno Verstraete, the CEO of Nautilus Invest in Zurich told CNBC on Thursday. “The biggest fire is still Europe. It would only be logical to see more triple-A downgrades.”
“The European storm will only stop when Germany is willing to accept a higher yield and lower rating. Euro bonds will be the sole savior,” said Verstraete.
The big question is whether the current market volatility and selloff is a sign of a meltdown for the system, but Verstraete believes the Chinese could come to the rescue.
“Is there a risk for a system meltdown? Yes, but rather limited as it is a universal problem and so far China has not really helped out its customers a lot," he said.
Given the currency reserves they have at hand, their firepower is a multiple of that of the European Central Bank, Verstraete said.
Having watched events in Europe and the debt ceiling talks in Washington, Verstraete believes much of the current uncertainty has been manufactured by the politicians.
“They all say it is time to act," he said. "The market does…only faster."