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Wealth Management: Market Perspective – Recessions and portfolios: Foreword (en anglais uniquement)

09/05/2019

Kevin Gardiner, Global Investment Strategist, Wealth Management

“Good morning, and in case I don't see ya, good afternoon, good evening and good night!”
The Truman Show (1998)

It looked like stability was breaking out - at least, until the latest trade tweets. The global economy has indeed slowed, not collapsed, and we have been pleasantly surprised (so far) by corporate profitability.

China and the US remain at the top of the premier league growth table, with the eurozone close to the bottom (even a rudderless UK may be outpacing it). But nowhere is there much inflation. We may think central banks - especially the Fed - are being too generous, but they've not done much damage yet.

Meanwhile, stock markets have been flying. Can they have much more short-term headroom? We've just been reminded that a US-China trade deal is not done yet, and the Fed may come to share our views on interest rates. But valuations remain unremarkable, and much 'clever money' is out of the market (again). Over the long term, we think stocks remain the asset most likely to beat inflation. 

For a decade now this unloved US expansion has outlasted and outpaced the miserable prognoses that have accompanied it. This summer it may become the longest ever, and its core growth rate looks little different to last time's (flattered then, of course, by mortgage excesses).  

A downturn is coming at some stage. This month we look back at history and ask how scared of recession investors should be. The answer is that it all depends - which is good news if you think we're doomed to another event like the Global Financial Crisis (GFC). 

We also suggest that despite economists' hubristic wish to abolish it, the cycle is a fact of economic life - and this may not be such a bad thing. A world in which we're routinely spared excesses and hangovers would be a bit like Truman's - superficially attractive, but somehow poorer.

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