Weighing the odds of an imminent recession.
Throughout most of the COVID-19 pandemic, markets have been running at full throttle. But in recent weeks, the economy has shown signs of overheating, prompting whispers of a looming recession.
Is the dampening of sentiment just a short-term blip or are these economic headwinds really suggesting a recession is in the cards?
In Canada, recession fears are mounting as investors digest a number of catalysts:
Though inflation continues to be a persistent problem and central banks are taking aggressive actions to cool price increases, does Canada have what it takes to weather the storm?
The most recent investor sentiment surveys suggest that a significant amount of uncertainty may already be discounted in equity prices.
In Canada, despite strong outperformance year-to-date, valuations also seem to suggest that a significant amount of risk is already priced in stock prices. As can be seen in the following chart, valuations are at the bottom quintile of their ranges over the past 10 years.
The Bank of Canada will surely attempt to slow the pace of economic growth while ensuring it does not push Canada into a recession at the same time. Though markets could remain volatilie in this context, all eyes will be on policymakers, who will have to strike a balanced approach going forward.
From an investor standpoint, a balanced approach to investing is also warranted. The best way to mitigate your risks is to maintain a well-diversified portfolio!
NBI SmartBeta Equity Funds
As long as these uncertainties are prevalent, markets will continue to go through periods of heightened volatility.
To help limit these fluctuations, NBI’s SmartBeta Equity Funds seek to minimize drawdowns and protect investor capital in market downturns.
NBI SmartBeta strategies:
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