Are Markets Getting Too Obsessed with Recession Fears?



Recession fears

Recession fears, which spooked markets in the fourth quarter, have come back to haunt investors. After a strong start to the year, markets have been short of bullish ideas in March. The SPDR S&P 500 ETF (SPY) has risen 1.3% in March, which takes its year-to-date gains to 13.0%.

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Yield curve inversion

The US yield curve inverted briefly last week, which ignited recession fears. A yield curve inversion has been followed by a recession many times, so markets aren’t really unreasonable in fearing a recession. Over the last several quarters, some observers have been seeing a recession coming. While there are some fund managers who have been predicting doom for the last six years since the “taper tantrum,” the list has been getting longer.

Credit Suisse

Joining the ranks is Michael Strobaek—Credit Suisse’s global chief investment officer. In an interview with CNBC, Strobaek said, “I have to say I’m a bigger believer of the predictability by the bond market. And they’re signaling either a combination of inflation going much lower and, or, growth going much lower.” He also said, “We’re really going into a slowdown and a recession” but clarified that a recession isn’t “right here, right now.”

A recession or a financial crisis can’t be ruled out. Last year, Warren Buffett, Berkshire Hathaway’s (BRK-B) chairman, said, “Well there will be one sometime.” Apple (AAPL), Coca-Cola (KO), and Kraft Heinz (KHC) are among Berkshire Hathaway’s biggest holdings, according to the most recent filings. Recently, markets haven’t been as obsessed with a recession.


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