David Jane, multi-asset investor at Premier Miton, says earnings have been “holding up” reasonably well, but he believes the market has become too sanguine about the potential for recession as a result of the need for interest rates to keep rising.
He says a time will come when markets start to “price in a recession”, and says the sweet spot in markets may be stocks that do well if inflation stays higher for longer, as he believes these assets would do well whether there is a recession or not, as inflation can remain high even if a recession occurs.
In terms of what this means for equities, Edelsten says growth stocks will likely fare better as many of those launch new products regularly, and can have good profit margins on those products.
So what should advisers be telling their investing clients?
As an investor himself, Monier’s view is that investors should be cautious in their allocation to stocks and focus on economies where either the economic outlook looks more positive than in developed economies, such as emerging markets, where growth rates are likely to be higher.
David.Thorpe@ft.com
