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WE STILL REMAIN DEFENSIVE…RECESSIONARY INDICATORS FLASH RED!

We still remain defensive in our asset allocations as global recessionary indicators are still flashing red – with the most recent being the US 2yr 10yr treasury yield inverting for the first time since 2007! (if you don’t know or remember, look up what happened after this occurred).

It is important to note that we are not yet in a global recession, however, be rest assured that we already have a foot in the waters – so it is noteworthy that whatever optimism you might have had at least start to pay attention now and consider being cautious. To mention a few, let’s look at a couple of indicators currently “screaming recession”:-

  • US 2s 10s yield curve inverts
  • US 30yr treasury yield hits lowest ever
  • UK 2yr 10yr gilt inverts
  • German Q2 growth at -0.1% q/q
  • German 30s treasury yield hits a record low
  • US ISM manufacturing in a downward cycle
  • EU area in inflationary deadlock
  • USD/CNY trading around the critical 7.00 psychological area (Contagion risk for Emerging Markets)
  • Global Central banks significantly easing
  • EU and JPY banking index literally dangling at the “Cliff of death”

 

In spite of the aforementioned macro-fundamentals indicating a possible recession, there are several current geopolitical and political events that may serve as a catalyst to propel a global recession materialization; viz:-

  • Further US-Sino trade war escalation
  • Brexit: No deal
  • Malicious evolution of Hong-Kong protest
  • Intensification of US-Iran stand-off
  • Japan-South Korea trade tensions
  • Deflationary risks as oil prices currently being pulled by a slowdown in global demand

 

The combination of all these does not in any way guarantee a global recession occurring, however, it would be very unwise from an investing point of view not to at least pay attention!

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