Mohammed Apabhai, head of Asia trading strategy at Citigroup Global Markets, said investors underestimate the likelihood that the Fed may raise rates to a higher level than currently expected, which will negatively affect the stock market and the bond market.
"Now, many stock markets look overvalued and may fall in the next three to four months, while the US dollar is likely to continue its rise," Apabhai said, adding that this year the S&P 500 index may decline by about 15% from current levels.
"To be optimistic about stocks, the US dollar should fall by another 10%, and it will be difficult if the Fed aggressively raises the interest rate. Overall, I think it is necessary to continue selling during the stock rally. One of the risks that the market has not yet taken into account is US interest rates at 6%," the strategist added.
As for the bond market, Apabhai said it is premature to buy Treasury bonds until the yield of 10-year bonds exceeds 4.25%. He expects an acceleration in the pace of quantitative tightening, which will lead to an increase in the dollar and put pressure on emerging market assets.