RECESSION!

Market report?

·??????The world’s most important central bank continued to raise interest rates aggressively this week?

·??????US economic data and corporate earnings continue to paint a mixed but deteriorating picture?

·??????A sharp bounce in stocks spurred debate on whether the worst is past…??

CIO view?

Alan Greenspan, former chair of the US Federal Reserve, famously observed to one Senate Committee in 1987 - “If I seem unduly clear to you, you must have misunderstood what I said.” Such is the world central bankers operate in. They are tasked with the often-unpopular job of keeping money stable, equipped with blunt tools and poor and incomplete information. This can mean, as with now, that they are forced to inflict short term pain on their charges to restore medium term order.???

That pain is beginning to manifest. US GDP data from this week gave us the two quarters of descent that some look for to shout recession. However, those charged with official categorisation (National Bureau of Economic Research) will likely be more reticent. There are certainly parts of the US economy visibly swooning. However, labour market heat remains considerable – the growth in available jobs continues to swamp the supply of workers. Our sense remains that the much-needed slowdown has begun in earnest, but there remains quite a way to go yet.???

Some investors appeared to disagree this week. The press conference that followed another 75 basis point announced rise in policy rates was parsed minutely for signs of a softening stance from the central bank. A so-called pivot, where we see the world’s most important central bank begin to scent victory in its fight against asphyxiate levels of inflation. For those looking very hard, there was some softer language deployed by Chair Powell. However, we would preach caution.???

We fear that a durable turn in the fortunes of stock markets is still a way off. Inflation data are unlikely to provide sufficient reassurance to stand the central bankers down for a while.?Meanwhile, the US and world economy will continue to unevenly slow. Corporate earnings season in the US has seemingly served up a little reassurance to some. However, earnings estimates for this year and next have a way to fall if we are right about the short-term economic outlook. One of the notable trends revealed by this quarter’s corporate earnings came from those facing off to a weakening US consumer.??

Even if the likely weakness ahead is not yet actioned by the analysts responsible for earnings forecasts, investors are already expecting some of it. However, as suggested above, we see the threat of more ahead and are positioned accordingly in our Tactical portfolio. The package of shorter-term positions researched, chewed over and implemented by our teams of specialists, currently tilts a little gloomy.??

For the main portfolio, the positioning is necessarily more sanguine. That ‘strategic’ mix of assets is specifically designed to prosper over the medium term – painstakingly diversified to scoop the rewards from the incoming industrial revolution. The interregnum between the wonders of the ICT revolution and the AI transformation that lies ahead is ending. No matter how worrying the short-term economic outlook, getting and staying fully invested remains essential if you are going to enjoy the fruits of the global productivity surge potentially around the corner. If you can help it, don’t look too much. The various teams of specialists I’m lucky enough to represent are on the case.??

Find out about our '?Ready-made investments' via our Smart Investor platform. A selection of five Barclays funds that each aims to increase the value of your investments over time, using a broad mix of asset classes from across the globe.

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*This article is for information purposes only. It is not intended as a product offer or investment advice