US Recession or Recovery

US Recession or Recovery

According to a team of Citigroup Global Markets investment strategists, the US is almost certainly going to suffer “recessionary conditions” for the rest of the year at least.  Although they do not foresee a global recession this year, they expect more earnings downgrades ahead.  In a European portfolio strategy document, Citi Investment Research head of European equity strategy Jonathan Stubbs said “Our economists expect 2.7 per cent global Gross Domestic Product growth in 2008”.

Mr Stubbs has outlined an investment strategy including adopting a “long growth/short leverage” sector approach: sticking to large-caps stocks: and seeking out earnings and dividend security.  He also favoured food and beverage companies, insurance companies, technology firms and utilities, while avoiding for now such industries as automobile manufacturing, media organisations, oil and gas companies, retailers and travel and leisure businesses.

Our view

We agree somewhat with Citigroup.  Given the significant reductions in interest rates in the US we anticipate large companies to do well in 2008 in the US with a knock on effect for medium companies in 2009.  We do not however, anticipate ‘recessionary conditions’ as it is in the public domain that interest rates are lower and both the public, small, medium and large businesses will take on a positive outlook.

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