Quarterly Outlook: wealth managers ready their clients for recession

The developed world remains at ‘significant’ risk of a relapse into recession over the coming year, believe a third of wealth managers, as something like despair begins to set in over policy failures.

The majority expected the currently elevated level of corporate earnings to remain resilient, however – an expectation backed by a rotation rather than a retreat from equity over the past three months.

Surveyed for Wealth Manager’s Quarterly Outlook as world markets experienced their greatest bout of volatility since 2008, little more than 10% of those interviewed expressed much optimism about the course of world growth, with the majority predicting an extended period of stagnation.

‘A double dip looks like it is baked in now,’ said Tim Price, director of investment at PFP Wealth Management, on the bearish end of the spectrum.

‘The developed markets have clearly gone ex-growth. The question is whether emerging markets are strong enough to pick up the slack?

‘I doubt it. The consensus is that developing economies suffer from insufficient domestic demand. That view is probably correct. That said, it would still make sense to expect emerging markets to outperform developed, because the fundamentals for the West look dreadful.’

John Godfrey, Edinburgh head of Barclays Wealth, was among the most enthusiastic.

‘[We are not predicting recession] at present,’ he said.

‘However, the macro picture has deteriorated quite significantly in recent weeks. We are watching this closely.’

One in five, unsurprisingly, listed the management of the Eurozone crisis as the most immediate risk factor they were planning for, with political risk a common theme across almost all of the responses.