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Billionaire hedge fund manager warns US recession would be ‘scary’ for stocks

Billionaire hedge fund manager warns US recession would be 'scary' for stocks

As economic indicators fluctuate and geopolitical tensions rise, concerns about the possibility of a US and global recession have emerged. Factors such as trade disputes, political instability, and monetary policy shifts contribute to the uncertainty, prompting experts to closely monitor the situation for potential signs of an economic downturn.

Discussing its potential implications, billionaire hedge fund manager Cliff Asness said the impact of a US economic recession on stocks would be frightening, as per a Bloomberg report on Tuesday, May 30. 

“If inflation stays sticky or it comes down because we enter a nontrivial recession —  it’s equities that I think are a scary place. They’re not priced very consistently with bonds.” 

– Asness said in an interview with Bloomberg.

As opposed to stocks, bonds are suggesting that the Federal Reserve will embark on an aggressive interest rate-cutting campaign in the following years, Asness told Bloomberg. This would result in a harsh recession, he added. 

The billionaire said that in their current state, stocks, and bonds are displaying opposite signals about whether US inflation will subside on its own, citing the divergence as his largest concern at the moment. 

On the other hand, the US could also experience “immaculate” disinflation that would not affect its growth. 

Global recession risks

In broad terms, over the past year or so, macroeconomic headwinds involving record-high inflation, belligerent interest rate hikes by central banks, and geopolitical tensions, have taken a serious toll on the global economy. 

As a result, most of the World Economic Forum’s (WEF) Community of Chief Economists said earlier this year they expected a global recession in 2023, citing a significant impact of these challenges on the US, Europe, and the rest of the world. 

Nearly two-thirds of WEF’s economists said a global recession is likely in 2023, 18% of which said it is ‘extremely likely. Only a third of surveyed experts said they do not see a global recession happening this year. 

Similarly, in the last week, Finbold asked Google Bard if the global economy would collapse in 2023. The AI tool said that determining the likelihood of that occurrence is uncertain, though it pointed out high inflation, the ongoing war in Ukraine, and the upward trajectory of interest rates as key factors that could contribute to that scenario. 

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