Investors start to be nervous, recession can occur in the near future
Investors are starting to get nervous about the recession that is predicted to occur later this year. This happens amid higher interest rates and tighter credit availability.
Roel of Salomons, head of strategy at Kempen Capital Management said this moment was the story of the end of the period cycle. The final cycle is a growing economy, but is ready to fall into recession, amid tighter credit availability, lower profit margins and tighter monetary policy.
According to Salomons, evidence for the final cycle can be seen from the equitable yield curve, which usually predicts future recessions; credit spread widened, which indicates that investors are afraid to take risks; and defensive stocks that outperform as a safer option to withstand changes in the economic cycle.
Salomons added that this cycle will be rolled out in 2019 and early 2020.
“It’s too early for the economy to roll but for the trade market it’s time to return home,” he added. This shows that because investors want to take less risk.Therefore they prefer US stocks to emerging market equities, credit with investment rates, and so on.
“The trade market is worried about the duration of the cycle of global economic expansion and the bull market has now limited the runway,” he wrote.
The end of the bullish market will indicate that equity may fall in price and increase sales. According to Godin, the best sectors to be implemented in such scenarios are technology, finance and energy.
“They are also sectors that currently benefit from the largest increase in net analysis for the coming quarters. However, equity markets will face a more volatile environment in the coming months with limited upside, in our opinion, “Godin added.