There has been a fear of a looming recession for the past few months and analysts have been comparing it with the 2008 global financial crisis. While there are a few similar headwinds this year that were seen in 2008, such as inflationary pressure and geopolitical concerns, there are also certain factors which show resilience, as observed by Lombard Odier Private Bank.
While there is persistent inflationary pressure across all major western economies, it is interesting to note that China’s domestic inflation is lower compared to what it was in 2008.
On the other hand, the US debt-to-GDP ratio has almost doubled compared to 2008’s figures which is a matter of concern as it reduces the power of the government to implement stricter fiscal regulations to support a slowing economy. In Europe, the scenario is far more concerning, observes Stéphane Monier, CIO at Lombard Odier.
The Swiss bank says that geopolitical risks are at higher levels in 2022 compared to 2008, due to the Russia-Ukraine war and US-China tensions.
The personal savings rate in the US has been falling drastically owing to inflation. It has come down to a level of 3.1% in the Q3 of 2022 and this is the lowest since 2008. This is more shocking as the personal savings rate went up to 33.8% during Covid-19, which was also expectedly higher. “With two thirds of GDP in the world’s biggest economy driven by consumption, the health of the US consumer is key to the economic outlook,” writes Monier.
The labour market is promising despite the above-mentioned factors. The unemployment rate is at an all-time low in the US. Except for China, all other major economies are having unemployment rates lower than the corresponding levels in 2008.
So, the imbalance in the economies around the world has come down compared to pre-global financial crisis levels. However, there is rising concern about rigid fiscal policies to curb inflation. Lower unemployment rates and resilient corporate and banking sectors can act as cushions, says Lombard Odier.
View the complete report here.
Read more
City of London Investment Management
The case for Closed-End Funds in Emerging Markets
Closed-end funds have long been a niche investment vehicle, but what makes them particularly compelling in today’s emerging markets environment?
J.P. Morgan
The “golden era for gold”
Gold rallies on peaking yields, firm demand, and a weaker dollar outlook.
Apollo Multi Asset Management
Why absolute return matters more than ever
A disciplined absolute return strategy can deliver stability and low correlation in volatile markets.
HSBC Asset Management
Europe & EMs poised to eclipse U.S. equity dominance
Small caps in Europe and EM outperform, reversing years of large-cap dominance.
