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Citi’s Fitzpatrick - Major Markets to Resume Their Decline
Today top Citibank analyst, Tom Fitzpatrick, told King World News, “For people who feel that Germany is just going to capitulate, Merkel has been fairly clear that she is taking a hard line.” Fitzpatrick, a 28 year veteran and top analyst at Citibank, which has $1.3 trillion in assets, also said, “We expect to see a reemergence of the stresses, as well as the equity markets beginning to fall again.” But first, here is what he had to say about deteriorating consumer confidence: “We’ve been looking at this for a while, and, if you look at the overlay of the consumer confidence index vs the equity markets (see chart below), what it quite clearly shows, contrary to what most people think, is that the consumer sentiment drives the equity markets rather than vice versa.”
Tom Fitzpatrick continues:
“We saw that in 2000, 2007, and again in 2011, that when consumer confidence peaked and turned, it’s often an early warning sign that markets are headed lower. Within a couple of months you started to see equity markets come under pressure.
It’s been no different this year, with the consumer confidence turning in February. Then we saw the S&P turn in April, and the Dow top out on the first trading day of May. Looking at the chart, we’re convinced it’s a very strong double-top formation, very similar to what we saw back in 1980.
The suggestion to us is that we are headed all the way back down again, possibly even to the lows that we saw in 2011, when we got down to about 41 on the index. This is likely to weigh on equities.”
Fitzpatrick also added: “When turning to the German 10-Year yield, I think that is also supportive of the markets heading much lower than current levels. The German 10-Year stalled at resistance and has come off it, and the same is true of US long-end yields. Money is being placed in both of these markets because of the high level of fear.
Everything on both charts still suggests to us that we are going to see a reemergence of yields moving to the downside, in both Germany and in the US. At the same time, we have already seen the start of yields moving to the topside in both Spain and Italy....
Continue reading the Tom Fitzpatrick interview below...
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“Spanish and Italian 2-Year yields are moving faster than 10-Year yields, so we are seeing those curves bear-flatten, as distinct from the bull-flattening pattern in Germany and the US. We expect to see a reemergence of the stresses, as well as the equity markets beginning to fall again. Our feeling is we will see that once again after we get through this weekend.”
Fitzpatrick had this to say regarding the crisis in Europe: “At the end of the day, Merkel has been consistent in terms of the path she’s taking. Any concessions she tends to make, she wants to see further austerity measures put in place. At this point in time, her bias has been that any increase in coordination or coordinated responsibility, should come after the right actions have been taken.
That is something that is a very strong indicator going into the meeting at the end of this week. For people who feel that Germany is just going to capitulate, Merkel has been fairly clear that she is taking a hard line. But the markets like to interpret everything that comes out as the glass is ‘half full.’
I think what you are likely to see is this meeting is going to come and go, like so many of these other European meetings have come and gone, with little or no resolution to the underlying problems.”
© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. However, linking directly to the blog page is permitted and encouraged.
The interviews with legendary Jean-Marie Eveillard (oversees $50 billion) and Don Coxe ($538 billion BMO) are available now. Also, be sure to listen to this week’s line-up of other KWN interviews which include Ben Davies, Nigel Farage, James Turk, John Mauldin, Egon von Greyerz and Gerald Celente by CLICKING HERE.
Eric King
© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast,
rewritten, or redistributed. However, linking directly to the blog page is permitted and encouraged.
June 27, 2012
