I believe that financial markets are overpricing the risk of a global recession. We could be in for a pleasant surprise…
Summary:
- We should be careful of talking ourselves into a global recession
- Energy costs remain key: US gasoline prices are starting to fall at last
- US inflation rates are likely to fall, Europe/UK inflation should follow suit but later
- Opportunities today in global Oil & Gas companies, US investment-grade corporate bonds
Podcast: Food, glorious food
Edmund Shing and Guy Ertz discuss food production and food security
- What is the future of food production, and what are the main challenges?
- How does this topic relate to the global challenge of reducing CO2 emissions?
- What is the link between food and water security?
- How can one invest in this food security theme?
Are we talking ourselves into a recession?
There are many reasons that we can expect a global recession - rising interest rates, sky-high energy costs, weakening domestic consumption and cooling residential property markets worldwide, to name but a few. It comes as no surprise then that real-time readings of the US economy (such as the Atlanta Fed GDPnow indicator) indicate a dip in overall activity for the current quarter. It is unlikely to be much different in Europe.
US Q2 growth nowcast points to negative growth
Source: Atlanta Fed
However, this does not mean that a global recession is nailed on. First of all, this GDPnow estimate can change, as it does tend to be quite volatile.
Secondly, in the case of the US, both long-term interest rates and gasoline prices for consumers are falling, relieving some of these short-term pressures on activity and on consumption in particular. This reflects a dip in crude oil prices, as well as an easing in oil refining margins for oil-producing companies after a recent spike to abnormally high levels.
US gasoline futures finally ease back after a sharp rise
Source: macrotrends.com
In addition to a moderation in US energy prices, food prices have also calmed down after a sharp spike following Russia’s invasion of Ukraine (as Ukraine was formerly a huge exporter of foodstuffs including grains and sunflower oil). This will also ease some of the immediate pressure on consumers around the world, and is especially welcome in developing economies where basic foodstuffs are a huge component of the average consumption basket.…
