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    GLOBAL MARKETS |  3 POINT PERSPECTIVE

    Equity markets: Rushing to a recessionary endgame?

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    Contributor: Anita Tanna

    18 May 2023

    authorImage

    Contributor: Anita Tanna

    18 May 2023

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    With central banks and governments reducing monetary and fiscal support, global financial markets are becoming increasingly fragile. Anita Tanna, Head of EMEA Equity Sales and Execution Services considers the impact on investor behaviour in equity markets. 

    1. The anticipated macro landscape isn’t reality yet

    As Central Banks and governments globally have started to unwind supportive monetary & fiscal policy, financial markets have become increasingly fragile and susceptible to economic shocks.

    Although default levels in Europe are rising, they’re actually still pretty low by historical standards, despite the recent spike in financial stress.

    Moreover, lending patterns are pointing to weaker capex in Europe over the next few months, but again, this hasn’t yet fully played out. Even though we’re in this new paradigm of higher inflation and rates, the full economic impact of this tighter framework has yet to take effect.

    2. Investors rushing to the recession end game are driving volatility

    Many investors have been surprised at the resilience of economic growth versus their much more bearish expectations. As a result, some investors have been rushing to the end-game of the recessionary playbook, for example, net short positions in US futures are at their highest level in the last 8 years.

    This can create crowded positioning and leave investors susceptible to painful ‘unwinds’ as their bearish views are challenged.

    The reality here, is that the unravelling of the ‘free money’ narrative is taking time to play out. Meanwhile, equity markets are constantly torn between peak rates relief but also recession angst.

    3. We believe in a defensive outlook for European equities medium-term

    Given there’s now less central bank & government support and we’re in a new paradigm of higher inflation & rates, we’re much more cautious on equities medium-term.

    More medium-term, we believe that weakness in the labour market could be the canary in the coalmine with regards to weaker corporate earnings in Europe.

    We are monitoring things like private credit the commercial real estate market and also household & corporate indebtedness to look for potential issues.

    If a recession were to play out, investors would likely turn to ‘bond-like-equities’ or higher quality businesses that are reasonably priced.

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    About the expert

    Anita Tanna

    Head of EMEA Equity Sales & Execution Services

    Anita Tanna is Head of EMEA Equity Sales, High Touch & Program Trading Execution Services for Barclays PLC based in Canary Wharf, London. Prior to that she was at Citigroup for 12 years where she held a number of senior management roles. She started her career at Bear Stearns as a Financials Analyst and also worked at Goldman Sachs in European Equity Hedge Fund Sales. In her current role, Anita manages people in multiple regions with responsibilities across Cash, Derivatives and Prime Finance. She manages stakeholders' different business areas including Equity, Macro & Cross-asset Research, Trading & Sales, both in EMEA and globally. Anita sits on several regional and global executive committees including the Global Cash committee and Sales committee for Markets. She has driven various agendas on ESG, talent & diversity across Equities and Global Markets.

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