Buy Real Assets; Fundamentals Still Weak

Avoid stocks and bonds and go for real assets as economic fundamentals are still weak, advised Roman Scott, managing director at Calamander Capital.

Scott remained in the bearish camp and said he did not believe the upward momentum in equities could be sustained.

“The markets are looking better (but) remember a lot of that was recovery from deeply oversold lows and U.S. markets are still 25 percent off,” he said on CNBC’s Protect Your Wealth. “A lot of the European markets only look good because their currencies have depreciated.”

Scott pointed to the anemic recovery seen in the G3 economies, saying markets are far too upbeat when Japan is fighting deflation and U.S. unemployment stays high.

“The market is reacting extremely positively when numbers come out saying things are merely getting worse at a slower rate,” he explained. “I remain very pessimistic about deflating Japan and consumption levels in Japan. In the U.S., real level of unemployment is close to 16, 17 percent when you accumulate all the data on the under-employed and those that have been out of work for a long time.”

As such, he cautioned that investors, who have bought into oversold markets last year, to take profits.

“We're currently entering a dangerous time for financial assets because you're starting to see the start of recovery -- a long, slow recovery, but recovery nonetheless -- that means tightening,” he said.

Scott added that stocks usually struggle in such an environment unless corporate earnings come through strongly, which he said would be a challenge, given the weakness in employment and consumption.

As for fixed income assets, a tightening cycle leads bond prices to go down. Scott said he believe that, and a huge overhang of government debt which will be issued by major governments in the world, are “going to be death for the bond market."

“So the best protection, we think, is real assets, both from the commodities side and on the real-estate side,” he said.

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