The UK and Europe face escalating economic concerns, driven by global long-term interest rate rises and contrasting equity market optimism, according to a new report.
In its September 2023 'FischView' report, Fisch Asset Management found that persistent inflationary pressures, climbing inflation expectations and expanding government debt are major contributing factors to rising interest rates, which seem to be largely disregarded by equity and high-yield credit markets.
Krishna Tewari, investment strategist, Fisch Asset Management, highlighted that while the US might skirt a predicted recession, the eurozone and the UK are not so fortunate. The stark decline in Swiss exports in July serves as a testament to Europe's broader trade woes.
The eurozone's purchasing managers' indices for the services and manufacturing sectors have notably declined, indicating intensifying economic adversity.
With China grappling with its own set of economic challenges, there's a looming risk of these issues spawning a global contagion effect, noted the report.
Despite these alarming indicators, global equity and credit markets radiate optimism, possibly misjudging the prevailing risks.
Investors should "remain cautious" during these turbulent times, said Fisch Asset Management, emphasising the potential pitfalls in European equities and high-yield bonds.
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