Komal Sri-Kumar, Chief Global Strategist and Group Managing Director for TCW, appeared on CNBC yesterday with a sharp warning against the excitement being generated in the markets right now—and particularly against yesterday’s sudden sell-off in Treasuries.
That’s making investing in equities particularly risky right now because, he believes, valuations of equities are much higher.
Among Sri-Kumar’s biggest worries are a slowdown in China, continuing problems in Europe, and the possible unsustainability of improvements in the U.S. economy—particularly in terms of unemployment.
And if this reversal manifests, he opines, even Apple won’t be able to avoid taking a hit.
Nevertheless, the prospect of a pullback doesn’t mean there’s not a way for investors to make money right now:
- “One is on the U.S. side, be defensive. I would say very many of the consumer staples—health care, utilities, which provide you with high dividends—they’re going to be good to get money.”
- “With the 10-year U.S. treasury having gone to $227 and the 30-year Treasury having fallen, we say go big. There are ETFs you can go into. Play it and watch the yield come down again and take profits from it…There is an opportunity for the yield to come down especially if I see the European problems are not resolved and if the U.S. economy comes under pressure with the consumer not delivering as much as he or she has over the last few months. Both of which mean you’re going to get a lot of benefit.”
- “Short the euro. We started doing it at $1.35, $1.36 with respect to the U.S. dollar. Today it’s barely above $1.30. I still think it still has a lot more weakening to go and that’s, again, one other place to make some money.”
Watch Sri-Kumar’s full interview from CNBC below: