US Inflation hit 9.1% for June 2022, highest since 1981 and forecast for July 2022 remains elevated at 8.9%. (Source: Bloomberg)
US GDP declined 0.9% in the second quarter of 2022 as against expectations of positive 0.5%. (Source: Bloomberg)
Consumer confidence index hit a record low of 50 in June 2022 while business confidence as indicated by ISM Manufacturing PMI at 52.8 in July 2022 is weakest since June 0f 2020. (Source: Bloomberg)
Central banks which helped the World and markets recover from Covid-19 blow, are not seen today to be in a position to help improve the worsening situation. In fact, central banks’ action to fight the inflation by raising interest rates is expected to further slowdown the economy through higher cost of capital and asset deflation.
Consensus is predicting 40% probability of a US recession. With 2 quarters of consecutive negative growth, technically, US economy is already into a recession. (Source: Bloomberg)
We are hopeful that the recent correction in commodity prices and concerted efforts of the central banks will help inflation cool off in coming months. However, there is always a risk of unknown. A prolonged war, escalation of geo-political tensions in Asia, unresolved European energy crisis or stressed supply chains can send global economy into a tailspin.
Given the heightened uncertainty, investors are naturally a worried lot and growing noise about recession is not helping the cause.
Though our base assumption remains a gradual recovery from here onwards or at worst a mild recession, we better be prepared for any unpleasant outcome. We attempt therefore to provide our investors with granular insights into ‘Recession’ so that you are well prepared for any eventuality.
Hope you find these insights helpful in your endeavor to build a resilient portfolio and achieve sustainable wealth.
Sr Fund Manager
Author: Mr. Amit Nadekar, Senior Fund Manager - Equity