August 22, 2019, 8:03


The New Recession: Price Bounces, Negative Returns Signal Global Downturn

The New Recession: Price Bounces, Negative Returns Signal Global Downturn

New moves on global markets are sending financial advisors back to defensive investment positions, according to reports.

As of last week, the S&P 500 index was down 11.3 percent since September, the Nasdaq 100 dropped 13.9 percent from its August value and the Russell 2000 Index of small-cap stocks decreased by 19 percent. 

“I usually come down to the side of the market, because the market represents the collective views of a tremendous number of investors,” John Carey, a fund manager for Amundi Pioneer Asset Management in Boston, recently told Bloomberg. “The market can be wrong, but I never dismiss it out of hand.”

According to Robert Buckland, Citigroup’s chief global equity strategist, the MSCI World All-Country Index will price at a 1 percent decrease in earnings next year.

“Our models suggest that global equity may now be too bearish on the earnings outlook,” Buckland told Bloomberg. “This suggests investors should buy the dip.”

“Since Bloomberg began tracking the data in 1992, the S&P 500 at this time of year has stood at an average of 17.4 times income that ended up materializing in the next year,” it was reported Friday, indicating that while Wall Street anticipates a 9 percent profit next year, the market could actually decline by 5 percent.

“The market is wrong,” asserted Anik Sen, global head of equities at PineBridge Investments, cited by Bloomberg. “Clearly it has been a slowdown, but the slowdown can be very transitory in our view. At the end of day, there is enormous pent-up demand, whether it’s capex or technology spending. None of that has changed.”

According to a 2014 study by the International Monetary Fund, none of the 49 recessions around the world in 2009 were predicted by economics a year prior to their occurrence. Just two of the 60 recessions of the 1990s were predicted by economics a year earlier.

“The way the market is pricing right now is it’s pricing in negativity of macro events, and they should,” Paul Richards, President of Medley Global Advisors LLC, told Bloomberg.

“These are big events and if they go wrong, people would lose more money,” he remarked.

 

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