Recession in the United States is unlikely despite alarm in the bond market

 The United States is unlikely despite alarm in the bond market

The United States is unlikely to face a recession in the next two years, despite bond markets sending warning signals, inflation at its highest point in decades and geopolitical risks mounting. rise, said portfolio managers at PIMCO and Amundi.

A part of the US Treasury yield curve, closely watched in the market, briefly inverted on Tuesday, a sign that investors are concerned that the US Federal Reserve's aggressive rate hikes to curb inflation could drive the economy into a recession.

"We see a low probability of a recession this year or next. Our models show the risk is slightly above the historical average, but not at a level that is worrying," said Erin Browne, multi-asset portfolio manager at bond giant PIMCO. , at the Reuters Global Markets Forum on Wednesday

Browne's view was seconded by Ken Monaghan, co-head of high yield at the US arm of Europe's biggest asset manager Amundi, who told the forum that he does not expect a recession in 2022 and that one in 2023 is unlikely. despite some risks.

The last time this portion of the US2US10=RR yield curve, which compares 2-year to 10-year Treasury rates, inverted was in 2019, and the following year, the United States entered a recession, although this was caused by the global pandemic.

Stocks, however, played down the ominous sign earlier this week, with the S&P 500 closing 1.2% higher on the day the curve momentarily inverted.

I do not rule out that a recession is possible. However, if you look at the fundamentals of the high-yield (bond) market and the savings that the consumer - especially in the United States - has accumulated ... we don't see a recession anytime soon," Monaghan said.

The portfolio manager cited low junk bond default rates and signs that investors are holding on despite the risks.

Aided by the pandemic, US household wealth rose to a record $150.3 trillion in the final quarter of last year, a financial cushion that can keep consumers spending and limit the economic damage from the invasion. Ukrainian Russian.