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Barron's: Forget Recession, Here's What Investors Should Fear Most

Barron's: Forget Recession, Here's What Investors Should Fear Most
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By    |   Thursday, 24 October 2019 09:42 AM

Forget global recession, one investment expert advises.

Investors reportedly should focus on the trend away from globalization, possible liquidity risks, and a world of economic stagnation and anemic interest rates.

Amundi Global Chief Investment Officer Pascal Blanqué recently told Barron’s he has been warning clients to try to preserve capital and be agile for opportunities.

“The short-term fears about global recession are overdone because the strength of the consumer is clearly underestimated as the structure of global growth has changed versus 10 years ago,” Blanqué told Barron’s, saying economies like China are fueled by consumption rather than exports.

As the world focuses less on globalization and more on regionalization, Blanqué favors emerging-market companies tied into domestic consumption and services companies tied to structural growth as Beijing makes China’s economy less dependent on exports and rising incomes fuel demand for financial services and health care, Barron’s said.

He also favors investments in “help yourself” countries like Brazil and India, as well as Indonesian and Russian equities, as these countries enact reforms — including pension reforms in Brazil and tax cuts in India. 

“If you believe rates will be extremely low, the only game in town is to pick up yield in the system. It is the mother of all battles,” Blanqué said, adding that there has been a lot of demand for emerging-market debt. He said he prefers dollar-denominated debt.

While investors have piled into high-yield bonds, Blanqué said the risk of defaults could rise, Barron's explained. That is why he is taking a more concentrated approach in high-yield bonds. “Diversification in the classic sense doesn’t help that much.”

As far as an actual recession, Nobel-prize winning economist Robert Shiller predicts that President Donald Trump’s “bullish effect” on financial markets will keep any recession at bay for many years.

The Yale University economics professor explained to CNBC that Trump fosters an economic environment that is conducive to strong consumer spending, which is a major deterrent to any recession.

“Consumers are hanging in there. You might wonder why that would be at this time so late into the cycle. This is the longest expansion ever. Now, you can say the expansion was partly [President Barack] Obama,” he told CNBC.

“But lingering on this long needs an explanation,” said Shiller, who believes Americans are still opening their wallets wide based on what Trump personifies: consumption.

“I think that [strong spending] has to do with the inspiration for many people provided by our motivational speaker president who models luxurious living,” said Shiller, who was awarded the Nobel Prize in Economic Sciences with Eugene Fama and Lars Peter Hansen in 2013.

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Forget global recession, one investment expert advises.
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2019-42-24
Thursday, 24 October 2019 09:42 AM
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