Recession Fears Affect Stock Investors, and Equity Markets Affected

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Private Investors are seeing telltale signs that point to a possible recession in the following months. Many experts feel these threats may impact the global economy in 2023 more than the rising inflation.

According to Andrew Michael from Interactive Investor, due to the uncertainty of the economic outlook in 2023, “the majority of private investors would stay on the investing sidelines in the coming months, either because they were unsure how best to re-jig their portfolios, or because they weren’t planning on making any changes.” 

He added that investors he spoke with were torn between prioritising to achieve investment growth or focusing on strategies to preserve existing capital already invested

A survey was conducted by the Association of Investment Companies (AIC) to gain insight into the professional investing perspective. The survey discovered that more than half of the participants believe inflation has already peaked. 

Furthermore, the participants expressed that their greatest fear is a possible corporate earnings slowdown and, ultimately, the prospect of a recession.

Head of Equity Strategy for Interactive Investor Lee Wild noted, “While we don’t know exactly what will happen next year, we do know that the UK economy will likely spend at least some of it in recession. And that’s by far the biggest worry. A fifth of investors are investing more money in the US where exposure is primarily to growth stocks like the technology sector.”

Recently, the APAC equity markets ended in the red, with only Hong Kong’s Hang Seng Index seeing positive numbers. Australia’s trade surplus declined to $12.2 billion in October, and exports and imports dropped by 1% from the previous months.

Rupert Watson, Head of Asset Allocation at Mercer, advises investors, “I wouldn’t recommend anybody to go short equity at this point. Hedge funds, long-short equities, long-short credit. I think the time to own and add those to your portfolio makes a lot of sense. Because [over the] last ten years, no shorts have worked. At this point, I believe you can add a lot of value by incorporating long-short strategies.”

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