Royal Bank of Scotland economists have urged investors to sell everything except high-quality bonds, warning of a “fairly cataclysmic year ahead.”

Writing in a client note dated Jan. 8, the bank’s European rates research team said that clients should be concentrating on return of capital, not return on capital, and that an ominous outlook to the world economy “all looks similar to 2008.”

The Key Points

• The note is particularly bearish on China and global commodities, and predicts that oil could fall as low as $16 a barrel.
• In a grim set of predictions, Andrew Roberts, head of European economics, rates & CEEMEA research said that the world has far too much debt to be able to grow well.
• He also warned that advances in technology and automation are set to wipe out up to half of all jobs in the developed world.
• The note says equities could fall 10% to 20%.
• It predicts the year will be spent focusing on how to exit positions that have benefited from long-running QE, including emerging markets, credit and equities.

Source: http://blogs.wsj.com/moneybeat/2016/01/12/rbs-warns-sell-everything/?mod=e2fbRBS

A 10 to 20% fall in equities certainly isn't a long shot. QE has produced a long run-up in stock prices, and on average, we see a market correction of 10% every two years and a 20% correction every five years. Still, the advice to "sell everything" seems a bit much.