A recession in the US is looking more likely, but that won’t necessarily be all bad news for markets according to Wall Street analyst Tony Dwyer of Canaccord Genuity Wealth Management.
On a recent visit to the Crown Dependencies, Tony Dwyer (pictured), Chief Market Strategist at Canaccord Genuity Wealth Management, hosted several briefings with industry leaders, which outlined his assessment of what is currently happening in the US economy and why key indicators are pointing towards a recession there by the end of this year.
Exploring the data for inflation, credit, economic activity and earnings, Tony explained that there may be some short-term pain for markets, but this will be followed by opportunities for investors, especially in small to mid-cap markets. He also advised against a sell temptation as most of the negativity is already priced in.
“A recession in the US will provide a welcome reset for markets and could ease inflationary pressures being felt across the western world,” he told audiences in Guernsey and Jersey.
“We believe the Federal Reserve is approaching the tail end of what has been one of the fastest scales of interest rate hikes on record. Credit is going to remain tight and that is causing weak economic activity but heightened fears of recession in the US is also fuelling expectations of lower inflation to come and therefore rate cuts by the beginning of 2024.”
Most countries in Europe are also experiencing a slowdown in their economies as central banks tighten rates, and lenders have become more cautious. Markets have been turbulent since the end of the Covid pandemic, with supply chains struggling to meet demand and the Russia invasion of Ukraine all affecting global trade and confidence.
Tony explained that there could be worse news to come [out of the US] and that any bad news needs to be bad so that markets can fully reset, and therefore recover from a more solid base: “The US market has never bottomed before a recession, and the recession hasn’t arrived yet”, he said. “At the moment there are good short term low-risk options for respectable returns, but investors should be ready for the longer-term opportunities that are likely to occur in the next few months, once the markets have fully adjusted.”
Commenting on the visit by Tony Dwyer, Andy Finch of Canaccord Genuity Wealth Management said: “It’s always an honour to welcome Tony to the Island. He is one of the most highly respected and sought after market analysts on Wall Street and over the years he has built a special relationship with investment professionals here. There are few people who have their ‘finger on the pulse’ like Tony does, and he gave us an interesting insight into the temperature of the market right now.”
A recession in the US, and particularly a slowdown in consumer spending on goods, could have ramifications for other nations, including the UK and Channel Islands but may not prove negative for the global economy, especially if it relieves pressure on creaking supply chains which is one of the major contributors to the current cost of living crisis.