OPINION: Two leading strategists at Macquarie and JP Morgan have opposite views about a US recession. One of them will be right.
The debate over whether the United States will have a recession can be explored in many ways, but one is to analyse the contradictory perspectives of two leading strategists.
“Our view on risk markets in 2023 consists of two periods: market turmoil and economic decline that will force the pivot, and subsequent economic and asset recovery,” he says in his 2023 Outlook.“However, the critical parameters of this market path are the depth of the correction that prompts the Fed pivot, and the point in time next year that this pivot happens.
“A mitigative factor for this near term negative view is the continued low positioning in risk assets. Shvets made a call in early December that “within months, investors would be focusing on what comes next: the strength and sustainability of recovery into 2024–25”. “This is in line with our view over the last 12 months, that there will be no need to destroy demand in order to bring inflation down and that we are not “running out of people, goods or commodities.”
Shvets says most indicators continue to show a post COVID normalisation of demand – supply equilibrium in goods, services, and labour, with declining inflationary pressures, easing labour markets and wage push, elimination of bottlenecks, bottoming-out of leading indicators, and return to pre-COVID sectoral balances.
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