After putting an end to one of the worst first semesters in recent decades, all market players are rushing to reorganize their portfolios, looking for the best way to face a second part of the course in which China, the shadow of the recession and consumption indicators they will continue to be key to regulating the temperature of the inverters.
This is how he explained it general director of Fidelity International for Spain and PortugalSebastián Velasco, during a talk with the media organized by his manager.
“It paints that the year 2022 is not going to be as it seemed, and rather it will remind us of those lived in the 70s. We are already seeing those downward revisions in growth forecasts, which in Spain It has taken us from 7 to 4 percent, and we will see where it takes us the most,” said Velasco.
Chances of recession increase
In this context, the CEO of fidelity He explained that uncertainty is still very high, once the recession has taken the focus off inflation, and the consequences of the invasion of Ukraine are still unknown.
As a consequence of all these challenges, Velasco pointed out that from his company they have been seeing a lower appetite on the part of investors for some timeand that this reluctance applied to both institutional and private investors.
“This third quarter of 2022 could be vital in determining the trajectory of the markets and economies for the next few years,” they explained from Fidelity, adding that, “in this rapidly changing environment, we are focused on managing risk and establish the implications in the medium term”.
For fidelity, therefore, the three issues that will lead the market debate in the coming months and will help to discern the direction that it can take, are old acquaintances of all investors: China’s post-pandemic performance, the hard landing they carry out central banks, and the response of consumers to the current situation.
From the fund manager, in fact, it was concluded that the risks for world growth at the moment are clear, leaning towards thinking of a hard landing of the economy in which the central banks cause a recession, either accidentally or on purpose.
Under this premise, the manager raised the probability that this scenario materializes from 35 to 60 percent.
China stands out from the global context
In this framework, Fidelity pointed out that China “It is an exception” in going through a phase of its economic cycle in most countries, and that its resurgence from the confinements of the spring “is a very clear positive signal for its economy.”
The manager’s experts, however, preferred to remain cautious about the Asian country, before launching their final reflection on the third element to watch during the third quarter, that of consumption.
“Consumers have a lot to deal with. Many of them are suffering the pangs of inflation, which is creating enormous hardship as the cost of living soars and purchasing power declines,” the Fidelity analysis noted.
For this reason, the manager considered that “the resistance of the global consumer to the increase in costs and the tightening of financial conditions could be the key to determining the severity of the economic landing.”
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