Why You Should Not Fear a US Recession

The S&P 500 is back into positive territory for the year, although losses in the U.K. and Europe are still in the high-single-digits, but investors should stay positive

Mark Preskett 29 February, 2016 | 1:16PM
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Mark Preskett: Financial markets have started the year in a volatile mood and we've seen sharp sell-offs across all major equity markets. Indeed, it was a worst January for stocks since 2009.

There were three clear phases in the sell-off. The first was led by concerns over China's move to a dirty peg on its currency and the weakness in the RMB was translated as weakness in the economy as a whole. The second focused on the sharp oil price falls and more recently the negative sentiment has shifted to financials, particularly within Europe. Looking at year-to-date numbers, however, and the more recent rally has brought the S&P 500 back into positive territory for the year, although losses in the U.K. and Europe are still in the high-single-digits.

What has worked has been fixed income, particularly the long bond and it has proven once again to be a good diversifier against equity volatility in multi-asset portfolios.

Looking forward, our focus as ever is on the health of the U.S. economy and our base case is we will not see a U.S. recession this year. With this in mind, we have not moved underweight to equities within our portfolios and the recent sell-off has unlocked some good value for investors, particularly within emerging markets.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Mark Preskett  is a Senior Investment Consultant & Portfolio Manager for Morningstar UK                       

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