Expectations are rising that a recession is around the corner, but current economic conditions do not correspond with that outlook: unemployment is low, while demand is strong as consumers catch up after a spell of pandemic-induced parsimony, as Maya Bhandari, head of multi assets, explains to chief market strategist Daniel Morris.
They expect to see a hard economic landing with the accompanying spike in unemployment and contraction in spending, but until the middle of next year. By then, company earnings trends may be negative to reflect recessionary conditions and credit spreads should have widened. At that point, the odds of major central banks reversing their rate rising cycles will have grown substantially.
Watch the video with Maya and Daniel for more on BNPP AM’s cautious multi asset allocation including an underweight position in European equities and long positions in Chinese tech and Japanese stocks thanks to their immunity from the current risk factors.
Please note that articles may contain technical language. For this reason, they may not be suitable for readers without professional investment experience. Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. This document does not constitute investment advice. The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns. Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions). Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.