Is A U.S. Recession Lurking Around The Corner?

“Another interesting tidbit we uncovered in our research is that having cheap valuations heading into a downturn tends to be associated with a smaller overall portfolio drawdown,” she stated. What this likely means is that, although the next recession may be mild, U.S. equities are at heightened risk for a steeper pullback, due to their expensive valuations, Ng concluded.

More market volatility likely in the UK as the Brexit drama continues

Turning to Brexit, Ng noted that the political rollercoaster over the UK’s divorce from the European Union continued the week of Dec. 10, punctuated by Prime Minister Theresa’s May survival of a no-confidence vote. “Because the revolt against May failed, she’s free from another challenge to her leadership for 12 months,” Ng noted, “but make no mistake, her position of authority has been severely weakened.”

So, what might happen next? “We think the majority of Parliament still wants to avoid a no-deal Brexit,” Ng said, “but it just so happens that at the moment, they can’t decide what they alternatively want.” As a result, UK bond yields and sterling will probably remain volatile as the saga continues, she said.

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