The writer is global chief investment officer at Credit SuisseIn keeping with a fine financial industry tradition, this is the time of year for prognostications of the health of the world economy and what to do with the collective wisdom of investors.
Trawling through the economic and investment outlooks of the various banks and asset managers, many have noticed an overwhelming consensus for a recession next year in the world’s largest economy.
According to this script, a recession in the US in 2023 should lead to a rapid deceleration in inflation thereby allowing the Federal Reserve to stop hiking rates and then — at a later stage — to start cutting rates to get us out of trouble. This script is a familiar one seen in the US recessions of the early 1990s, 2001 and 2008. What invariably follows is a market rally in equities, and investors live again for another cycle.