Fiscal stimulus in the U.S. prompted stock market rallies at the start of the year. However, with the Federal Reserve poised to announce further interest rate rises, there is concern that stock markets could enter sell-off mode. This is because higher rates dent profit margins for businesses and thus the available returns for investors.
Beat Wittmann, a partner at financial consultancy Porta Advisors, told CNBC’s “Squawk Box Europe” last week that rising rates are one of several factors increasing the chances of an economic recession next year.
“We have normalization of monetary conditions, that’s one thing, so we are in a late stage environment. Then we have this escalation in tariffs and trade… we have things like Brexit. All of these things lead to losses of investment confidence and I mean real economic investment confidence,” Wiitman said.
But, for Bell, the political and trade risks are already factored in so the real risks are more likely to commence around 2020.
“Once you start looking ahead to 2020, that fiscal stimulus starts to fade, you by then presumably have quite a lot of higher interest rates, so I think the risks for the economy start to build in the U.S. around 2020,” he said
Be the first to comment