Economy

Recession fears recede as global trade tensions ease

Brighter economic outlook prompts a shift away from bond markets towards stocks

Progress in US-China trade talks has buoyed risky assets in recent weeks. Photograph: Lam Yik Fei/New York Times

Tommy Stubbington
Tue Dec 17 2019 - 21:21

A flurry of rate cuts and an easing of trade tensions in recent months should be enough to fend off a global recession, according to an influential survey of some of the world’s largest fund managers.

The probability of a recession in the next 12 months has dropped sharply to just below 40 per cent, according to investors surveyed by Absolute Strategy Research (ASR). The fall, from 53 per cent three months ago, marks the steepest quarterly decline in recession risk in the survey’s 4½-year history.

The brighter economic outlook has prompted a shift away from bond markets towards stocks, according to ASR’s research, which is based on a survey of 183 fund managers collectively controlling $4 trillion (€3.6 trillion) of assets. Two-thirds of investors now expect stocks to outshine bonds over the coming year, up from 55 per cent three months ago.

Progress in US-China trade talks has buoyed risky assets in recent weeks, while bond yields around the world have picked up from the all-time lows they reached in summer and early autumn amid signs that the global economy is in better health than some investors feared.

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The survey suggests investors think these trends will continue. David Bowers, ASR's head of research, described the ebbing of perceived recession risk as a "dramatic shift", adding: "What dominates this survey is the unwinding of 2019's global recession scare."

– Copyright The Financial Times Limited 2019

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