While it is easy to conclude the April-May rally in local and...

While it is easy to conclude the April-May rally in local and global equity markets, led by short sellers and daring retail investors, will soon force the hand of cautious institutions, pushing equity markets a lot higher, strategists at European powerhouse Amundi are not so convinced.....Amundi remains of the view that risk remains very well alive for risk assets, suggesting investors start making small allocations to market laggards and cyclicals, but with a conservative and cautious bias overall.The Paris-headquartered asset manager distinguishes three key areas that may well deliver the next major disappointment for current “risk ignorant” equity markets:-the covid-19 pandemic; markets have casually adopted the view the worst is behind us and there will not be a second or third wave. Plus, we’ll have one of several vaccines available in the next few months;-the economic recovery; investors are willing to price in positive scenarios on the back of huge fiscal and monetary support measures;-the credit cycle; on Amundi’s assessment, credit markets have priced in a first round of defaults, but not a second follow-up for traditionally laggard assets. Plus, the battle between liquidity and solvency is as yet far from decided. Amundi is closely monitoring US commercial real estate.Amundi’s view is probably best described as “tell them they’re dreaming”. The advice to investors is thus not to chase current momentum, but instead to gradually and selectively play investment themes better positioned towards a slow road to recovery.Other risks to consider for investors include rising tensions between China and the US, the uncertain outcome of the approaching US presidential election, idiosyncratic risks in emerging markets (such as Brazil) and longer-term consequences from this year’s pandemic (many not yet quantified).ConclusionAmundi’s conviction call that investors should stay vigilant and cautious is being complemented by Citi’s Panic/Euphoria indicator now warning market sentiment has moved back into a state of euphoria.History suggests pull backs will occur next, even though the exact timing remains unknown.Investors should note a number of technical analysts and trading systems would back up the signal provided by Citi’s indicator.*****Are Australian banks worth chasing?The question looks a lot different today than at the beginning of last week when share prices for major banks started flying by double digit percentages........Analysts at Macquarie have been surprised by how quickly and fiercely the upward correction in beaten down bank share prices came out of nowhere.They are also of the view that bank share prices remain “cheap” on a relative basis vis-à-vis the broader market to the tune of 10-20%.But they would not chase further market momentum from here onwards. The prime reason is that Macquarie sector analysts can see plenty of reasons as to why banks will, and likely should, remain at a sizeable relative undervaluation.Think low or even negative interest rates and bond yields. Add elevated impairment charges and higher costs still in the aftermath of the Royal Commission.Macquarie argues a quick V-shaped economic recovery would likely not be to the banks’ benefit as they’d find themselves fighting off increased competition. Thanks rudi. G.l.t.a.h.