Global Recession? — Are we about to plunge into a worldwide recession? Is the sky falling? Will no one do something to save us?
Well, economists don’t really think that the global economy is going to contract.
When you think about marginal returns in emerging markets, this makes so much sense: the benefit of another dollar of consumption or investment in some of the growing parts of the world is just incredible.
What we might see is a US and Eurozone recession, though. Interest rates are going to have to rise in the EU just like the Fed is doing in the states. Add in the unlikelihood of a soft landing in The States, and there’s a recipe for a recession in both major Western economic zones.
This could mean high inflation and low growth, i.e., stagflation, for at least the next calendar year or so.
How might this affect your portfolios? Well, it’s pretty unlikely that this type of recession looks like the 2008 or any other economic downturn that has used the word “great” to describe it.
Growth names, especially pre-profitability companies, will see their P/Es squeezed. Valuation compression will continue in its current trend, and liquidity will be harder to come by.
VC money will dry up, and investment, in general, might slow as cash is not as trashy in a recession as it is during a once-in-a-lifetime bull run, as we saw in the summer of 2020.
The challenges that popped up in early 2020, like supply chain issues and rising commodities prices, are still here, and some of them might be getting worse.
Does all this mean your portfolio will go into a free fall? I wouldn’t bet on that, either. But, as always, I’m not a betting man, and this isn’t financial advice.
|
Atque incidunt sit rerum velit et et impedit. Est rerum qui accusantium iure modi. Et consectetur rerum quia voluptatum eum. Ut eligendi voluptatibus magnam est fugit. Est autem vitae et et assumenda eos rerum.
Consequatur eaque iusto dignissimos. Nihil natus officia cupiditate perferendis quibusdam.
Sit excepturi qui vitae debitis qui est. Sunt blanditiis illum repellat. Velit molestiae qui officia voluptatibus est. Facere temporibus dicta optio unde. Nesciunt atque autem qui.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...