From here to a year, one global recession it is “very probable”, at least in Europe and America. Word of Alessandro Fugnoli, Kairos' strategist, who in the last episode of his monthly podcast “On the fourth floor” recommend a strategy for deciding how to invest in the markets in view of this scenario. At least for a few months, argues Fugnoli, it is the case of "easing on the upside rather than buying on the downside”. The picture is complex, but, according to the analyst, there is "good news", namely that "the markets are already priced in for a moderate recession and will therefore fall to new period lows only in the event of a long and severe recession ”.
However, we must be careful: "Buying on weakness - continues Fugnoli - will only be advisable for those who are currently particularly liquid". In any case, these are purchases to be made above all in "a trading logic – continues the expert – with the aim of exploiting the market recoveries that will accompany the fall in inflation”. For long-term purchases, on the other hand, "it will be more prudent to wait a few more months".
The two types of inflation
As for the price trend, the Kairos strategist warns that a distinction must be made between two types of inflation:
- the first is that of consumer goods, which could already show signs of abating in the next few weeks, triggering a positive reaction from the markets;
- the second, independent of the first, is the salary one “in countries where there is full employment and where job seekers can obtain a higher salary because there are few unemployed who compete with them”, explains Fugnoli. The Central Banks look above all at this second type of inflation, because it risks setting in motion the dangerous "price-wage spiral", as happened in the XNUMXs.
The implications on the markets
This picture, rather rare, "will make it difficult to navigate the markets in the coming months", underlines the analyst. Indeed, it is probable that, initially, markets will celebrate the decline in consumer price inflation, believing that it could herald less severe monetary tightening by central banks. After that, though, investors will have to dealing with “the other side of inflation”, the salary one, considered much more insidious by the monetary authorities.
“As already happened in the XNUMXs, employment could continue to grow for a few more months, even if we had already entered a recession - explains Fugnoli - The Central Banks, therefore, would feel motivated to continue raising rates, or at least to keep them high, longer than the market expects”.
The unknown quantity of Russian gas supplies
Finally, “for Europe the picture is made even more complex by issue of Russian gas supplies in the coming months – concludes the Kairos strategist – The prolongation of the suspension of supplies would ensure the European recession, particularly in Germany and Italy, already by the end of the year. On the contrary, even a partial recovery in supplies would be greeted by a big sigh of relief from the European financial markets”.
