Tim Rocks proclaims: “I’m the bear.”
The Nomura strategist says global quantitative easing has done nothing more than push bond yields down and expects stocks markets to slide globally in coming months by as much as 5 per cent as investors realise “the economic recovery is not there”.
“QE has been successful in that it has stopped financial contagion but the notion that it is stimulating manufacturing and helping to sustain an economic recovery is laughable,” says Rocks.
He is equally as gloomy about the prospects of the Australian economy now the mining boom has peaked. Rocks expects as many as 50,000 job losses in the 12 months to June 2015 as ebbing demand from the principal market, China, forces miners to cut workers.
“In the last three to four years structural changes in the Chinese economy will mean lower iron ore prices as steel production falls,” says Rocks. “I expect iron ore prices to fall below $100 a tonne.”
He says global commodity markets “are screaming” that demand is anemic for coal and copper. Coal and copper prices have been “scarily weak in the last few months,” says Rocks. “They are signalling something but the equity market is ignoring it,” he adds.
He says it is increasingly clear that US economic data has been negative recently with consumer confidence, retail sales and manufacturing data all ebbing. Rocks expects the recent data to show through in the current US earnings season.
Institutional investors, he adds, are overweight James Hardie Industries, News Corp and Brambles, all Australian companies with significant US exposure. “If the weakness in data continues these shares could be at risk,” says Rocks. “You have all the preconditions for the markets to be appreciably lower.”