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By Emiel van den Heiligenberg, Head of Asset Allocation, LGIM
Rising household debt levels and pressure on company margins mean the soft-landing narrative increasingly looks like a fairy tale. The crucial question for risk asset returns in 2023 is whether we’ll see a recession in the next 12 months or not. Our recession indicators are not improving, and the US Federal Reserve (Fed) continues to raise rates, meaning we still believe there’s a 75% chance of recession by year end.
We agree with last week’s comments from European Central Bank (ECB) board member Isabel Schnabel when discussing the Eurozone: “Markets are priced for perfection. They assume inflation is going to come down very quickly toward 2% and it is going to stay there, while...
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