COM - Time to 'get back into cash' Nomura says

The market is looking priced to perfection at present, Nomura said in a note out Monday.

Fair value is being achieved across assets, according to the Nomura quant team and that is being seen in the S&P 500 ( SP500 ) ( NYSEARCA: SPY ) ( IVV ) ( VOO ), MSCI Emerging Markets ( EEM ), the 10-year Treasury ( US10Y ) ( TBT ) ( TLT ), high yield bonds ( HYG ), the yen ( FXY ) vs. the dollar, the euro ( FXE ) vs. the dollar, gold ( XAUUSD:CUR ) ( GLD ) ( IAU ) ( PHYS ) and WTI crude oil ( CL1:COM ) ( USO ) ( USL ) DBO.

The markets have repriced to be more in tune with a higher terminal Fed rate expectations, Charlie McElligott, equity derivatives strategist, said.

"Now, in the absence of the macro Rates re-pricing and flow-catalysts having already largely 'played-out' and achieving the correction, it’s back to Cash ( VMFXX ) ( MUTF: SPAXX )  while awaiting further range-trading opportunities from yet-another 'overshoot' in the opposite direction — potentially as March sees the release of February data reflect the 'give back' from the Jan warm weather, alongside ever-increasing 'base-effect' drag back on inflation…and ironically, appropriately 'tighter' financial conditions too weighing on growth data again," McElligott said.

As bonds and yields likely consolidate "at this 'priced-to-perfection' juncture, so too does cross-asset volatility likely then lose its recent tailwind, following the resumption of 'Fed policy path distribution' widening-out, as nearly 60bps of implied Fed tightening has been added since the start of February - and again, in absence of 'more upside surprise,' looks set to stall at 5.50%," he added.

"The right trade now is to get back into Cash, in light of what the recent front end repricing is giving you ... and wait for the next range-trade/narrative/ positioning overshoot."

See why Gene Munster has 50% of his portfolio in cash .

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