Invest
Are we on the cusp of a recession?
Models used to forecast market directions suggest the risk of a global recession in the next two years is low, but minor shifts in market performance could change that drastically, according to a global investment firm.
Are we on the cusp of a recession?
Models used to forecast market directions suggest the risk of a global recession in the next two years is low, but minor shifts in market performance could change that drastically, according to a global investment firm.
Last year saw many investors worry that “stuttering growth” in numerous countries and “plunging” commodity prices could prompt a recession (a period of poor performance typically indicated by two consecutive quarters of negative GDP growth), a recent report from Standard Life Investors noted.
“Although the worst fears of investors were not realised, and global economic growth has subsequently reaccelerated, the episode serves as a useful wake-up call,” the report said.
“It forces us to question where we sit in the global business cycle and – most importantly – when is the next recession due?”
Using a number of forecasting models, the asset management firm analysed the current market environment and found the chance of a global recession in the short term is slim, but cautioned that investors shouldn’t relax just yet.
“The modest risk of recession flagged by our models should not provide cause for complacency, especially for those investing on longer horizons,” the firm said.
“Our models have some predictive ability one and two years ahead, but their reliability fades as time goes on because the forces that bring cycles to an end are not always in view that far out and some recession triggers fall outside the scope of our framework.”
Additionally, the economists who put the report together found that only slight adjustments to market conditions were needed to dramatically increase the risk of a recession, with the most notable example being a single standard-deviation fall in year-on-year returns increased the probability of a recession on a three month horizon by 20 per cent.
Changes in a number of other variables, such as real residential investment and credit spreads are also likely to affect the possibility of a global recession, the report cautioned.
Standard Life Investments said that investors can feel confident about extending their investment horizons “for now”, but that they should keep an eye on the market moving forward to minimise their risk.
RELATED ARTICLES
Property
Young buyers poised for a comeback as 5% First Home Guarantee takes effect
In a move set to reshape the Australian property landscape, the government’s revamped First Home Guarantee is poised to open the doors of homeownership to a new generation of young AustraliansRead more
Property
AFG Securities waives settlement fees for first-home buyers, signalling strategic shift
In a strategic move aimed at easing the financial burden on first-home buyers, AFG Securities has announced the elimination of settlement fees on select loans, potentially saving customers up to $699Read more
Property
From trust woes to wealth: Australian agencies' secret to boosting prices
In Australia’s residential market, trust is no longer a nice-to-have—it’s a pricing variable. Persistent distrust of real estate agents is depressing vendor outcomes and inviting regulatory heat, but ...Read more
Property
Reality check for first home buyers: Affordable suburbs with 5% deposit
In a significant development for Australian first home buyers, a new property search tool from Aussie Home Loans is set to transform the way prospective homeowners approach the market. As the Federal ...Read more
Property
Trust as a performance multiplier in Australia's real estate market
In Australia’s A$10–11 trillion housing market, trust is emerging as a crucial factor that sellers and agencies can no longer afford to overlook. Traditionally viewed as a soft metric, trust is now ...Read more
Property
LJ Hooker Lake Macquarie makes a splash with Belmont buy as real estate consolidation looms
LJ Hooker Lake Macquarie’s acquisition of the Belmont office, including its rent roll, is less about shopfronts and more about balance‑sheet resilience. In a market where listings ebb and flow with ...Read more
Property
Twice the demand: the case study behind Melbourne’s first‑home buyer surge
Melbourne has quietly engineered one of Australia’s most consequential housing turnarounds, with first‑home buyer demand running at roughly double the national pace and four of the top five buyer ...Read more
Property
First‑home buyers now anchor Australia’s mortgage growth — but the risk maths is changing
Great Southern Bank’s revelation that nearly one in three of its new mortgages went to first‑home buyers is not an outlier. It is the leading edge of a broader market realignment powered by government ...Read more
Property
Young buyers poised for a comeback as 5% First Home Guarantee takes effect
In a move set to reshape the Australian property landscape, the government’s revamped First Home Guarantee is poised to open the doors of homeownership to a new generation of young AustraliansRead more
Property
AFG Securities waives settlement fees for first-home buyers, signalling strategic shift
In a strategic move aimed at easing the financial burden on first-home buyers, AFG Securities has announced the elimination of settlement fees on select loans, potentially saving customers up to $699Read more
Property
From trust woes to wealth: Australian agencies' secret to boosting prices
In Australia’s residential market, trust is no longer a nice-to-have—it’s a pricing variable. Persistent distrust of real estate agents is depressing vendor outcomes and inviting regulatory heat, but ...Read more
Property
Reality check for first home buyers: Affordable suburbs with 5% deposit
In a significant development for Australian first home buyers, a new property search tool from Aussie Home Loans is set to transform the way prospective homeowners approach the market. As the Federal ...Read more
Property
Trust as a performance multiplier in Australia's real estate market
In Australia’s A$10–11 trillion housing market, trust is emerging as a crucial factor that sellers and agencies can no longer afford to overlook. Traditionally viewed as a soft metric, trust is now ...Read more
Property
LJ Hooker Lake Macquarie makes a splash with Belmont buy as real estate consolidation looms
LJ Hooker Lake Macquarie’s acquisition of the Belmont office, including its rent roll, is less about shopfronts and more about balance‑sheet resilience. In a market where listings ebb and flow with ...Read more
Property
Twice the demand: the case study behind Melbourne’s first‑home buyer surge
Melbourne has quietly engineered one of Australia’s most consequential housing turnarounds, with first‑home buyer demand running at roughly double the national pace and four of the top five buyer ...Read more
Property
First‑home buyers now anchor Australia’s mortgage growth — but the risk maths is changing
Great Southern Bank’s revelation that nearly one in three of its new mortgages went to first‑home buyers is not an outlier. It is the leading edge of a broader market realignment powered by government ...Read more
