Bob Janjuah is changing his trader hat to investor hat.

Bob Janjuah, chief credit strategist at Royal Bank of Scotland, is back with his market missive.

View on currencies:

With this hat on, it is clear to me that, as we get into Q4 09, and probably for the next 12/18/24 months, I DO NOT want to own 'risk' (credit - esp. HY, equity), I DO NOT want to own USDs and GBPs on a long term basis, and I DO want to look at owning assets in EUROs (and maybe also JPY and AUD). In particular, because the ECB is by far the most credible central bank left when the choice is between the Fed, the ECB and the BoE, it appears to me that the Eurozone will drop into the debt deflation zone sooner rather than later and will by-pass the the MONETARY inflation risks so prevalent in the UK and US, thus on a decent investment horizon, I want to own very long dd govt debt issued from core-Europe, esp. of course Germany and France. I think getting a 4%+ carry on a multi-yr basis on German sovereign risk and ECB prudence makes an awful lot of sense at a time where not much else really has ANY VALUE left.

Market outlook:

Anyway, let me say 1st up that even though its all been pretty marginal, the RISK here is that over the next month or so we see risk assets go even better. This is a TACTICAL call and is NOT a change in the 3/6mth secular call, which REMAINS BEARISH. Andy Chaytor set some levels last week which I am comfortable with - there is a 60/40 chance that S&P trades up to 1120ish by end Sept/early Oct. I think the next month will be volatile and NOT straight line, but on balance the risk is that by month end/early Oct, risk assets will be better. And YES, I know that Sept is seasonally one of the weakest months, that we are already 5% off the Aug highs, and that 'everyone' - even the bulls - think we need a period of pullback/consolidation, but for me the perfect head fake will be a strong (but volatile) Sept.

I do however think that we are VERY MUCH in the tail end of the correction of the Oct 07 to Mar 09 bear move, where S&P lost nearly 60% from peak to trough, and where the correction from the Mar low would, at 1120, represent the 50% retrace. Once what I assume is a bear mrkt correction finishes, over the next month or so, I expect the Bear to return with vengeance and I retain my call for NEW LOWS in equities. That's 550 S&P!!

Of course if I am wrong then additional Stop Losses are critical. For me, the next stop loss is at 4 consecutive S&P closes above 1120. I recognise that the weight of opinion/mood is against me, and that it would be far EASIER for me to roll over, get with the herd, and move to the bull camp. But I have yet to see anything that convinces me otherwise - the ISM going back up to 50 was what Kevin told me in Jan/Feb we'd see, by around August time - and critical here is the call on whether balance sheet health & sustainability matters or not. Until I see hard evidence telling me otherwise, I will run the risk of being labelled unpopular/a perma-bear/blind/stupid - take your pick, I have been called much worse...by my wife!

h/t ZeroHedge