Recession alarm bells are ringing: How to prepare and what’s overlooked

Published on 27 November 2023

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Edward Smith, chief investment officer at Rathbones Group, discusses what signals he is focusing on this week and how he’s preparing for a long-debated recession to hit global economies—with particular concerns that the UK will be struck hardest. He unpacks the firm’s investment strategy, what recession signals he is paying attention to, and what is being overlooked in Q3 earnings.

North America

  • Equities volumes were low for the year to date, but liquidity saw no change. US Investment grade volumes dropped but liquidity continues its impressive positive streak.
  • Data: House Sales, GDP Growth and Core PCE. Earnings e.g. Snowflake, Salesforce, and BMO.
  • Primary Equities: 5 IPOs expected to price at $56 million in aggregate proceeds. The largest would be Lucas GC. (Data obtained as of Nov 23 due to holidays)
  • US axe data, which is within normal ranges, indicates a higher proportion of bids versus asks in credit.

Europe and the UK

  • Equities volumes dropped off but liquidity remains good for year to date. Euro investment grade  volumes down but bid-ask spreads were still favourable.
  • Data: Inflation rate and Unemployment rate on Nov 30. Earnings e.g. Diageo and Roll Royce Holdings.
  • Primary Equities: There are no IPOs expected on European exchanges this week. (Data obtained as of Nov 23 due to holidays).
  • EU axe data, which is within normal ranges, suggests a higher proportion of EU dealer asks versus bids in credit.
  • GBP axe data, within normal ranges, suggests much higher net buying Vs selling of credit.