Berenberg strategist Jonathan Stubbs urged clients to continue taking a cautious approach despite a strong YTD move lower.

“It’s too early to be brave, hard-to-impossible for investors to find conviction here and valuation, absolute or relative.”

Hence, there is no need to aggressively buy equities despite the strong selloff. More importantly, it is still important to have crash protection mechanisms.

“Despite ytd moves, we would still run crash protection strategies and expect financial markets to be liable to “gap risk”. Equities have not become cheaper, relative to bonds, despite significant moves lower ytd. Therefore, the relative “terms of trade” for taking on equity risk here do not appear attractive compared to previous periods of macro distress in the last 10-15 years; it is different this time. With the end of the decade-long liquidity support from global central banks, we are witnessing price discovery in the absence of a buyer of last resort.”

The strategist has reiterated his stance that investors should go long energy and short industrials so they “can carry some crash protection exposure.”