Equities fare well in lead-up to economic slowdown: Fidelity head
There's no reason for investors to exit equities even though there's the possibility of a US recession.
A RECESSION in the US may be on the the cards based on a flattening US Treasuries yield curve, says David Buckle, Fidelity head of investment solution design.
But that doesn't mean investors should exit equities. "A yield curve this flat is a strong signal of a period of economic weakness. Historically equities do quite well in the lead-up to a slowdown.'' Mr Buckle was speaking at the Fidelity investment conference earlier this week.
The long-run forward price earnings (PE) multiples for the US and Europe, based on the S&P500 and Eurostoxx 50 respectively, are below equilibrium PEs. "It's unusual the people talk about the market being over-extended. I don't see that . . . The market is likely to go through a period of strength in the final period of the economic cycle.''
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