Japan-based investment broker, Garrett Knight, has warned institutional clients that the rout in US equities has room to run and they should avoid trying to “catch a falling knife”.

The two benchmark indices, the Dow Jones Industrial Average and the S&P 500 lost a total of 5% of their value last week as investors grew jittery over the apparent scale of the economic slowdown in China, the world’s second biggest economy. On Friday alone, the Dow slipped 530 points or 3.1%, its biggest one day loss since 2011. The S&P fell 64 points or 3.2% and taking the index negative for 2015.

“Stocks sold off with conviction,” said Grace Hallawell, Global Equity markets strategist at Garrett Knight. “When we see volume of this magnitude, we know that there’s typically more to come,” she added.

The global growth story continues to inflict heavy casualties on equity markets around the world as China, hitherto considered the primary engine of global growth, shows more signs that its economy may be suffering the hard landing that some economists have been predicting for several years.

“We’ve urged our clients to avoid trying to ‘catch a falling knife’ by picking a bottom in prices because stock market corrections have as much of a tendency to overshoot to the downside as they do going in the opposite direction. There’s more selling to come so the stocks they’re after could be even cheaper by next week,” added Hallawell.

Garrett Knight, which has spent much of the last 3 months warning clients against buying into what it deemed to be overpriced US equity market, says it cannot rule out a correction that takes the DJIA into bear market territory which is effectively 20% lower than its peak.

“With China’s slowdown and trepidation over the timing of a US rate hike, investors have quite a lot to worry about,” concluded Hallawell.
About Garrett Knight Associates

Garrett Knight Associates is a highly specialised international investment management firm. With over a decade's worth of experience in providing our clients with discretionary and advisory portfolio services for private investors, trusts, pension schemes and high net worth investors, we use an expansive array of carefully selected investment products to maintain healthy growth targets.

The main pillar of our investment ethos and the issue that separates us from other companies offering investment management services is our commitment to employee excellence, providing you with the highest level of personalised services. All of our staff listen very carefully to our clients' investment aims, with particular attention being paid to their preferences and interests.

Contact Garrett Knight Associates
Aria Shinagawa, Level 22,
1-9-36 Konan,
Minato-ku, Tokyo,
Tokyo-to, Japan