Markets are acting like a recession isn’t on the way: Strategist
Stock and credit markets in the developed world appear to be out of sync with economic fundamentals, one global market strategist is warning.
The equity and bond markets are not pricing in the very elevated risk of a recession that is likely to begin in the second half of this year, HSBC’s global chief strategist Joseph Little told BNN Bloomberg in a TV interview on Wednesday.
“The strength of developed equity markets (and) the resilience of the credit markets we think is a bit out of step with how fundamentals are evolving,” he said.
Little pointed to the intense speed at which interest rates have been raised throughout the world as the inevitable cause for a coming downturn.
“When you have that amount of monetary tightening taking place, it almost always ends up creating a slowdown and a recession,” he explained.
This dip in economic activity will ultimately lead to higher unemployment levels and a contraction in gross domestic product (GDP), which gives him pause when looking to invest in western markets, Little said.
“My biggest worry right now is that this isn’t recognized in the stock market,” he cautioned.
For now, he said the emerging markets can offer investors more opportunities than the developed markets.
“The asset class evaluations look attractive (in the emerging markets), and the growth and inflation mix is much better,” he explained.
Little pointed to Asia, Latin America, Brazil and Mexico as promising areas for investors.
“I’d be looking at emerging markets as the area to deploy that extra dollar,” he said.
The equity and bond markets are not pricing in the very elevated risk of a recession that is likely to begin in the second half of this year, HSBC’s global chief strategist Joseph Little told BNN Bloomberg in a TV interview on Wednesday.
“The strength of developed equity markets (and) the resilience of the credit markets we think is a bit out of step with how fundamentals are evolving,” he said.
Little pointed to the intense speed at which interest rates have been raised throughout the world as the inevitable cause for a coming downturn.
“When you have that amount of monetary tightening taking place, it almost always ends up creating a slowdown and a recession,” he explained.
This dip in economic activity will ultimately lead to higher unemployment levels and a contraction in gross domestic product (GDP), which gives him pause when looking to invest in western markets, Little said.
“My biggest worry right now is that this isn’t recognized in the stock market,” he cautioned.
For now, he said the emerging markets can offer investors more opportunities than the developed markets.
“The asset class evaluations look attractive (in the emerging markets), and the growth and inflation mix is much better,” he explained.
Little pointed to Asia, Latin America, Brazil and Mexico as promising areas for investors.
“I’d be looking at emerging markets as the area to deploy that extra dollar,” he said.
