2023-06-11 18:39:00
With U.S. stocks back in a bull market and the U.S. economy consistently outperforming expectations, the threat of a recession has eased, if not completely, some firms are suggesting. .
But such thinking risks making a grave mistake for investors, say some of the world’s biggest fixed-income managers, including Fidelity International and Allianz Global Investors. They advise keeping downturn forecasts and hedging bets on riskier assets.
The damage from the past 10 consecutive rate hikes has already been done, and with the major central banks holding on to their hawkish stances until something breaks, the collapse of three U.S. banks in March is just one piece of the bigger crisis ahead. That’s the view of those companies.Last week, while inflation remained persistently high,Canada andAustralia’s central bank has unexpectedly raised interest rates, putting some pressure on the Fed to follow suit at future meetings.
“My biggest fear is something like a credit crunch,” said Steve Ellis, global chief investment officer for fixed income at Fidelity International. He said the central bank’s continued tightening showed they were “taking on last year’s battle.”
Goldman Sachs Group last week estimated the probability of the U.S. economy slipping into a recession within the next 12 months.It had lowered its forecast to 25%. We revised our forecasts following stress in the banking sector eased and a bipartisan agreement to lift the U.S. debt ceiling.The company’s chief operating officer, John Waldron, said the U.S. is facing a recession.He suggested that it might be avoided.
news-rsf-original-reference paywall">Original title:Goldman’s Low US Recession Odds Get It Wrong, Bond Investors Say(excerpt)
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