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A recession in the US is looking more likely, but that won’t necessarily be all bad news for markets according to Wall Street analyst Tony Dwyer of Canaccord Genuity Wealth Management.
On a recent visit to the Crown Dependencies (Channel Islands and Isle of Man) Tony Dwyer, Chief Market Strategist at Canaccord Genuity Wealth Management, hosted several briefings with industry leaders, which outlined his assessment of what is currently happening in the US economy and why key indicators are pointing towards a recession there by the end of this year.
Exploring the data for inflation, credit, economic activity and earnings, Tony explained that there may be some short-term pain for markets, but this will be followed by opportunities for investors, especially in small to mid-cap markets. He also advised against a sell temptation as most of the negativity is already priced in.
“A recession in the US will provide a welcome reset for markets and could ease inflationary pressures being felt across the western world,” he told audiences in Guernsey and Jersey. “We believe the Federal Reserve is approaching the tail end of what has been one of the fastest scales of interest rate hikes on record. Credit is going to remain tight and that is causing weak economic activity but heightened fears of recession in the US is also fuelling expectations of lower inflation to come and therefore rate cuts by the beginning of 2024.”
Most countries in Europe are also experiencing a slowdown in their economies as central banks tighten rates, and lenders have become more cautious. Markets have been turbulent since the end of the Covid pandemic, with supply chains struggling to meet demand and the Russia invasion of Ukraine all affecting global trade and confidence.
Tony Dwyer explained that there could be worse news to come [out of the US] and that any bad news needs to be bad so that markets can fully reset, and therefore recover from a more solid base. “The US market has never bottomed before a recession, and the recession hasn’t arrived yet”, he said. “At the moment there are good short term low-risk options for respectable returns, but investors should be ready for the longer-term opportunities that are likely to occur in the next few months, once the markets have fully adjusted.”
Commenting on the visit by Tony Dwyer, Andy Finch of Canaccord Genuity Wealth Management said, “It’s always an honour to welcome Tony to the Island. He is one of the most highly respected and sought after market analysts on Wall Street and over the years he has built a special relationship with investment professionals here. There are few people who have their ‘finger on the pulse’ like Tony does, and he gave us an interesting insight into the temperature of the market right now.”
A recession in the US, and particularly a slowdown in consumer spending on goods, could have ramifications for other nations, including the UK and Channel Islands but may not prove negative for the global economy, especially if it relieves pressure on creaking supply chains which is one of the major contributors to the current cost of living crisis.
ISSUED ON BEHALF OF CANACCORD GENUITY WEALTH MANAGEMENT BY: ORCHID
Allan Watts
T: 07797 734735 E:allan@weareorchid.com
NOTES TO EDITORS
POTENTIAL IMPACTS OF A US RECESSION ON THE UK
Employment: A US recession could lead to reduced economic activity and business contraction, which may have spill over effects on the UK economy. This could result in job losses and increased unemployment rates in the UK, particularly in sectors closely tied to the US, such as finance, manufacturing, and technology.
Trade and Prices: A US recession can affect global trade flows and supply chains. If the demand for UK exports to the US declines, it could put pressure on UK businesses, potentially leading to reduced production and job cuts. Moreover, if the value of the US dollar weakens during a recession, it may lead to higher import prices for UK consumers, impacting their purchasing power.
Investment and Financial Markets: A US recession could lead to a decrease in foreign direct investment (FDI) in the UK, as companies become more cautious with their spending. This could impact industries reliant on US investment, such as technology start-ups. Financial markets could also experience volatility, affecting pensions, investments, and overall consumer confidence.
Consumer Spending: During a US recession, UK consumers may face uncertainties about the economy and job security, which could lead to reduced discretionary spending. This, in turn, could impact various sectors, including retail, hospitality, and tourism. Consumers might prioritize essential goods and services, leading to a slowdown in non-essential sectors.
Housing Market: The UK housing market could be influenced by a US recession. If the recession leads to a global economic downturn, it could result in reduced demand for UK properties from international buyers, impacting property prices and the construction industry. However, factors specific to the UK housing market should also be considered, as they play a significant role in its dynamics.
Government Policy and Social Impact: To mitigate the impact of a US recession, the UK government might implement policy measures such as fiscal stimulus packages or infrastructure investments. However, these policies may come with trade-offs, such as increased government debt or changes in public spending priorities, which can have broader social implications.
Psychological Impact: Economic uncertainty can have psychological effects on individuals. A US recession could create feelings of anxiety, job insecurity, and financial stress among people living in the UK. This can have implications for mental health and overall well-being, requiring support systems and services to address the potential challenges.
It's important to note that the specific impact of a US recession on the UK would depend on various factors, including the severity and duration of the recession, the resilience of the UK economy, and the effectiveness of policy responses.
ABOUT TONY DWYER
Tony Dwyer is Canaccord Genuity Wealth Management’s Head of the US Macro Group and Chief Market Strategist, and sits on the firm’s US Operating Committee, with 30 years’ experience ranging from the corporate boardroom to the individual investor. Best known for the practical application of macroeconomic and tactical market indicators in assisting institutional investors in making intermediate-term investment and spending decisions. Frequent guest on many financial news networks, such as CNBC and Bloomberg, reducing the complex jargon of statistics to an understandable and practical level.
ABOUT CANACCORD GENUITY WEALTH MANAGEMENT
Canaccord Genuity Wealth Management operations provide comprehensive wealth management solutions and brokerage services to individual investors, private clients, charities and intermediaries through a full suite of services tailored to the needs of clients in each of its markets. Canaccord Genuity Wealth Management has Investment Advisers (IAs) and professionals in Canada, the UK, Jersey, Guernsey, the Isle of Man and Australia and has advisers in Canada who are registered in the US. In Canada, Canaccord Genuity Wealth Management is a division of Canaccord Genuity Corp. In the UK, Canaccord Genuity Wealth Management operates as Canaccord Genuity Wealth Limited and, in the Channel Islands and the Isle of Man, as Canaccord Genuity Wealth (International) Limited. Canaccord Genuity Wealth Management deals with US persons through Canaccord Genuity Wealth Management (USA) Inc.
To learn more about Canaccord Genuity Wealth Management, visit https://www.canaccordgenuity.com/wealth-management-uk/
