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Recession fears open up opportunities for investors

by LLB Editor
10th Oct 19 8:17 am

Paranoia in the market around an imminent recession is over-played, according to experts.

We shouldn’t expect a return to the “Goldilocks economy” of 2017 and early 2018.Equities look relatively attractively priced.

Joseph Little, Global Chief Strategist, HSBC Global Asset Management, shares his investment outlook for the remainder of 2019.

“So far in 2019 investment returns have been strong across the board. Fixed income asset classes are up around 10%, and equity markets and alternatives have done even better. But, it hasn’t felt like a bull market environment for investors – in fact, it’s felt like the opposite.

“As yield curves invert and a third of global bonds trade on negative interest rates, the signals look ominous. A ‘storm of uncertainty’ has developed, brewing from cyclical weakness in manufacturing, political uncertainty and a lack of ammunition from policy makers. As investors, we need to look at ways to navigate and ride out this storm.

“However, it’s important to understand not just how the macro environment is evolving, but also what is being discounted by the market. Looking forward, our baseline macro scenario is not particularly optimistic, it is one of rather subdued growth, little inflation and “lower for even longer” interest rates. But against that, the market is already betting on a recession, assuming policy will be ineffective and pricing a profits collapse.

“We believe we are in the cyclical slowdown phase of the economic cycle – growth and profits are coming under pressure, but are not yet compromised. Global labour markets and services sectors remain firm. It is a bull market in pessimism and our cautious macro outlook is relatively optimistic. A pro-risk, but conservative investment strategy for investors, makes sense.”

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