Investors should be “dancing near the door” when playing the rally in stock markets, David Roche, global strategist at Independent Strategy, told CNBC on Tuesday.
Roche said that endless amounts of money being printed by central banks, as well as government support, suggest markets are having a “party”.
But investors should be mindful of risks.
“You want to play in liquid assets which you can get out of, which is called dancing near the door," explained Roche.
The strategy would allow investors a quick exit, should markets begin to pull back.
“You can’t predict that. It just happens one day in the market, “ said Roche. “The market (is) based on an assumption of a V-shaped recovery, in which the side of the V we are on goes into the blue sky forever. That probably won’t happen.”
Roche also added that the bubble in bond markets is worse than the bubble in equity markets.
“When I look at core treasurys in U.S. and JGBs in Japan, I see assets that are riding on a wave of liquidity which is totally unjustified by fundamentals.”
Once the bubble bursts, Roche advises buying gold. He also said that investors should be ready to long the dollar even if they think the greenback has weak long-term fundamentals.