Looking for reasons to bail on this market?
Take your pick: Triple-witching quarterly expiry, shenanigans in the repo markets, mounting geopolitical tensions — those are all factors weighing on the mind of Kevin Muir, strategist at Toronto-based East West Investment Management.
But the typically bullish investor behind the Macro Tourist blog pointed to this chart from Jim Bianco at Bianco Research as the pressing reason he’s dumping his long positions in U.S. equities and looking for opportunities on the short side:
His main worry: The U.S. is too tight for the world economy.
“The country with the world’s reserve currency has the highest policy rate out there in the developed world,” Muir wrote, pointing to the chart above. “If we look back over time, this has often coincided with market crises.”
He said the world should follow the U.S.’s lead and implement fiscal stimulus and stop relying on monetary madness. “But our job is not to decide what should be, but calculate what is,” he wrote. “And with the Fed so tight relative to the rest of the world, eventually it causes problems. Big ones.”
While he’s unloading stocks and looking to “take stabs on the short side,” he’s not completely apocalyptic with his view.
“I am not turning into one of those the end-of-the-world-is-upon-us bears. Yet I think the time to be heavily long is past,” he said. “The next 5%-10% in the stock market is more likely to be down than higher.”
No sign of a pullback on Wednesday, with the Dow Jones Industrial Average DJIA, +0.06% shaking off premarket weakness to turn positive.