Financial markets have greatly overestimated the chances of a global recession, according to a note by NN Investment Partners (NN IP).
Says Valentijn van Nieuwenhuijzen, Head of multi-asset at NN Investment Partners, said: “Developed market growth momentum fell back somewhat to around a 1 percent annualised pace during the second half of last year, but neither the level of growth nor the degree of the fallback looked alarming from a historical perspective. It falls easily within the range of movement in the business cycle that can be described as noise rather than clear change of direction.”
He adds that equity valuations have come down by up to 20 percent from the recent highs, implying an increased risk of an earnings recession. “We doubt this will happen outside the commodity sectors as the consumer sector is supported by low oil, low interest rates and an improving labour market,” he goes on to say.
NN IP says it has reduced its underweight in emerging markets from medium to small because of dovish Federal Reserve expectations, a weaker US dollar, relative economic data, very negative positioning and some stability in cyclical commodity prices. It has cut the eurozone to neutral shifted further its defensive bias by removing its overweight position in information technology.
