The world scene is very turbulent, that is obvious, but what can happen in the coming months? What are the risks in the markets and the economy? Will there be a global recession?
These are some of the questions that various experts and analysts from those who follow the pulse of the markets and the economy tried to resolve during the summit of the Retirement Savings System (SAR), called Amafore Meeting 2023.
Specialists in the global economy talked about what they consider will be the most likely scenario in the following months, although taking into account that there are imponderables that no one knows at this time.
These specialists put on the table what they consider to be the most probable scenarios for the coming months, according to the conditions of the financial markets in particular and the global economy in general:
- Jessica Tan, Global Head of Sustainable and Transition Solutions at BlackRock;
- David Page, head of macro research at Axa Investmen Managers;
- Carlos Hurtado, General Director of the Center for Economic Studies of the Private Sector;
- Erik Norland, senior economist at CME Group;
- Mahmood Pradhan, director of global macroeconomics at Amundi Group; and
- Richard Byrne, President of Benefit Street Partners and CEO of Franklin BSP Lending Corp,
More inflation for longer
A coincidence was in inflation. For experts it is clear that there will be more inflation in the coming months and therefore interest rates will be higher for a while.
Despite the decrease in inflation compared to the peaks observed last year, the truth is that pressures will remain. For this reason, there could be rebounds in the future, especially in energy-related products: gas, oil and electricity.
If nothing happens, if things in the world remain more or less as they are nowinflation will begin to converge towards the objectives of central banks by mid-2025. That is to say, the road is still long, since what remains of the year plus all of 2024, a period in which there could be some rebounds or inflation no longer going down any further, as in fact has been observed in recent weeks with certainty. “stagnation”.
Jessica Tan, Global Head of Sustainable and Transition Solutions at BlackRock, explained why she thinks the economy will have a “soft landing” in the coming months. “The United States worries the markets, but the Fed has done its homework, for now that will allow the economy not to have to collapseand that recovery is already occurring in almost all sectors, although uncertainty persists,” he explained.
“Inflation will persist in the coming months, we do not expect it to rebound, but we do expect it to remain constant, as in fact it has already done in recent weeks; That certainly means interest rates around the world will stay high for longer,” said David Page, head of macro research at Axa Investment Managers.
In turn, Carlos Hurtado, who directs the Center for Economic Studies of the Private Sector (CEESP), said during his speech that the persistence of inflation will be an adjustment factor in the markets for the coming months, but he trusted that the pressures do not grow additionally, to prevent the Fed from making greater adjustments in its monetary policy. Either way, the effects of the current policy will be more profound in the coming months.
Uncertainty and risks due to geopolitics
It is the first time in decades, since the Second World War, that the world has recorded two wars, two armed conflicts that, without a doubt, generate uncertainty and volatility in the financial markets and the global economy.
The Russia-Ukraine war was already a risk factor from its beginning, the fact that it has no sign of when it will end generated risks, today the conflict between Israel and Hamas is added, which although it is not a war between nations, it has the potential to “set fire” to a region that would lead the world to major risks.
Geopolitics is the biggest risk at the moment, if we consider that unpredictable things can happen in moments, but the final impact will always be registered in the economy, the experts agreed.
In fact, none of the experts wanted to venture to theorize about concrete effects on the markets and the global economy if the conflict were to escalate to other stages, especially because there are too many factors, such as the fact if Iran were to enter the war. , or if the powers come to play or want to play a different role.
What is highly probable is that this conflict will maintain the attention and financial volatility of the markets for as long as it remains in force.
“We are at very high risk levels due to the geopolitical situation, at this moment the situation in Israel means constant alert in the markets, what happens there will be essential for the coming months,” said Dr. Mahmood Pradhan, director of global macroeconomics. at Amundi Group,
Erik Norland, senior economist at CME Group, was emphatic in pointing out that the world is very exposed to what may happen in the Middle East. “We are in a very delicate situation, no one knows what is going to happen, but we do know that serious things can happen. The markets are closely following this conflict and its effects, especially in the energy markets, where the greatest risk for the economy and the world in general is concentrated,” the expert told those attending the event.
There will be no recession… in the short term
Another coincidence among the experts consisted of the fact that, for the moment and in the short term (the remainder of the year and at least the first quarter of the following year), a recession is ruled out according to the figures and perspectives of the experts.
For them, the US economy will have a “soft landing” if the trend reflected by the figures in the world and in that economy itself become a reality and are consolidated; This, in the first instance, is certainly good news.
However, recession seems to be the final path, perhaps it would be a “soft recession” after a “landing” in the same direction, but towards the year 2025 this probability will also increase substantially.
Even the “softness” of the recession will depend a lot on how much the geopolitical risk can be reduced by then and, of course, also on the economic situation.
“A soft landing for the US economy is likely in the coming months; What worries us is a broader horizon because as long as the US economy holds up there is no problem, as expected in the coming months,” said Richard Byrne, president of Benefit Street Partners and CEO of Franklin BSP Lending Corp.
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