Expert cautions against recession fears despite inflation

‘The future is not certain’. Expert cautions against recession fears despite inflation, says opportunities are in emerging markets.

Despite global markets falling on the back of recession fears. One financial expert remains optimistic saying economists are “normally not very good” at predicting how events will unfold with opportunities to be found in emerging markets.

Despite mounting global recession fears, Morningstar Chief Investment Officer Dan Kemp has urged investors to remain positive. He saying the future is “not certain” and that all may not be as bad as it seems.

Speaking to Business Now on Sky News Australia, Mr Kemp acknowledged global markets were trending downward. But stressed that was not cause for panic as economists were “normally not very good” at predicting how events would unfold.

“Everyone around the world is worried about recession. And we’re hearing lots of concerns from central banks and others about what’s ahead of us,” he said.

“But we need to remember that the future is not certain – inflation

Despite global markets continuing to fall on the back of recession fears. Morningstar’s Chief Investment Officer Dan Kemp remains optimistic saying economists are “normally not very good” at predicting how events will unfold.

“There’s a whole range of possible outcomes and economists are normally not very good at forecasting what happens next.

“It’s really important to think about that range of possible outcomes rather than get fixated on one economic scenario.”

In Australia, fear of a recession has grown stronger off the back of plummeting business. And consumer sentiment and the fastest monetary tightening ever experienced. With the Reserve Bank raising interest rates 11 times in the past 12 months.

Now the yield on government bonds, often seen by economists as an indicator of the health of the economy, has begun to invert, suggesting those fears may be justified.

However, while he acknowledged the inversion of bond yields could be “a sign” the economy was heading for a recession, Mr Kemp insisted the picture was not that simple.

“It is normally a sign,” he said.

“But when we think about what we do with that sign… If we’re investing it’s not as simple as just following a yield curve sign as to know what you should do.

“A possible recession is definitely something we should be thinking about.

“But really the point I’d make is it’s not the only outcome even with an inversion.”

He added that even if Australia did fall into a recession there was no guarantee it would have a “predictable” effect on the value of assets such as shares.

Investors looking to sure up in case a recession hit should look for long-term value. Mr Kemp said but warned many of the options traditionally associated with maintaining value in tough times, such as gold. Currently offer less value because many people were entering a safety-first mindset.

As a consequence there “wasn’t a lot to go for” in the current market. He said, suggesting those looking for returns might have to “get creative” as they attempted to find value.

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