Several bond markets have started to break down into short term downtrends, thereby also questioning their multi-months sideways movements.
This could easily lead to a sharp rise in yields on the long end of the curve.
At the same time, many equity markets are pretty much overbought, and several (although not all) sentiment measures are showing quite dangerous readings of complacency and bullishness.
We expect a medium term top to be forming either already now or over the next 1-2 weeks. An unexpectedly sharp correction could follow soon.
Therefore we advise to tactically reduce equity exposure and wait for a better entry later in spring or in late summer.
On a side note, our clients know that we have recommended shorting the French Government Bond future in Mid-January. We are now able to adjust a buy stop on that position to break-even.
Everybody is trying to prepare for the "next 2008", but maybe we need to prepare for the "next 1987"....
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