A recent report by Fisch Asset Management has sounded alarm bells over escalating economic worries in the UK and Europe. The report, titled "FischView" for September 2023, points to a confluence of factors driving these concerns, including increasing global long-term interest rates and a seemingly contrasting optimism in equity markets.
One of the primary contributors to rising interest rates, according to the report, is the persistence of inflationary pressures, accompanied by climbing expectations of inflation and the expansion of government debt. These factors appear to be largely overlooked by equity and high-yield credit markets.
Krishna Tewari, an investment strategist at Fisch Asset Management, highlighted that while the United States may manage to avoid a predicted recession, the outlook for the eurozone and the UK is less sanguine. This sentiment is underscored by the sharp decline in Swiss exports witnessed in July, reflecting broader trade challenges in Europe.
Furthermore, the report points to the declining purchasing managers' indices for the services and manufacturing sectors in the eurozone, signaling a deepening economic adversity in the region. The challenges in China's economy also add to the concerns, with the potential for these issues to trigger a global contagion effect.
Despite these warning signs, global equity and credit markets continue to exude optimism, potentially underestimating the risks at hand. Fisch Asset Management advises investors to exercise caution in these turbulent times, emphasizing the potential pitfalls in European equities and high-yield bonds.
In summary, as global interest rates rise and economic challenges persist, particularly in Europe, Fisch Asset Management's report underscores the need for vigilance among investors in the face of what may be underestimated risks in equity and credit markets.
By fLEXI tEAM