The dos & don'ts of gearing up for a recession
Whether you’re convinced that a recession is imminent or you’re more sanguine about the economy, it pays to be be prepared for a downturn, particularly since no one can have perfect foresight. Here are the dos and don’ts of gearing up for a potential recession
DO… HAVE A PLAN
‘Difficult doesn’t mean down. It just means you need smart people and a clear roadmap of how you’re going to get where you want. You can’t just go along for the ride’ – Matthew Benkendorf
DO… LISTEN TO CENTRAL BANKS
‘The Federal Reserve has paused its tightening cycle, at least for the time being, and that has been received favourably by the market so far’ – Peter McLean
DO… STAY NIMBLE
‘December was a great opportunity to build new positions in US equities and we are now slightly overweighting the credit area too’
– Alberto Garcia-Cabo Fernández
DO… MONITOR RISKS
‘We are being more conservative, dancing closer to the door. Even if the cycle goes on longer and we earn a bit less, we’re taking less risk, so that’s our approach’ – Ulrich Voss
Don’t:
DON’T… GET AHEAD OF YOURSELF
‘There remains very little evidence that we are on the brink of a recession. It’s true that growth is slowing, but it’s not collapsing’ – Peter McLean
DON’T… FEAR RECESSIONS
‘People exaggerate the pain of recessions. Look back over the past 100 years at the number of recessions. They’re in the single digits and they’re typically not that long and not that painful. They’re great opportunities’ – Matthew Benkendorf
DON’T… IGNORE CREDIT MARKETS
‘I still think the default rate will remain low in 2019, but I do think we’re going to see more credit surprises this year than we did in 2018. Our strategy is to be very selective by sector’ – Mark Holman
The Chapters
With index huggers coming under greater scrutiny, investors are proving more willing to pay up for alpha. But should they expect to take on more risk as result? Fund managers and investors debate the merits of a high conviction approach in the current environment
Recession or dip? How to prepare portfolios with conviction
With the Fed pausing on its rate hike path and recession indicators proving unreliable, trusted data sources are giving mixed messages. Investors and fund managers discuss how a high conviction approach can help portfolios find a way through the noise
The information trail remains daunting for asset managers. Company reports and announcements are one option, providing insights into more than 100,000 firms globally. Then there are tens of thousands of funds and ETFs to track, macroeconomic indicators to parse and political risks to monitor.
Gaining access to the right data has become an important part of fulfilling your fiduciary duty. How can fund managers reach clear conclusions and avoid the pitfalls of the echo chamber?