This rather shocking directive is actual advice Royal Bank of Scotland (RBS) recently issued to its investment clients (minus the questions marks). The large Scottish bank predicts a “cataclysmic” year in 2016 (akin to 2008) in which stocks fall by more than 20% to bear market territory and oil falls into the mid teens, down another 50% following its nearly 60% plunge over the last 18 months. The only exception RBS sees is high quality bonds.
It is rare for a global financial institution to issue such a radical edict. Forecasters at large firms gnererally play it safe and are a positive bunch even when they shouldn’t be. On average they predicted exactly none of the previous four down years in the stock market (more on that in a moment).
The fact that RBS has done so now is interesting but not necessarily a reason to give it extra weight. In fact there are several reasons readers of Ned’s Notes should maintain skepticism toward all economic forecasts, whether from major institutions or individual luminaries.
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