This article first appeared in Livewire markets on 15 February 2024
While every investor has different time horizons, it's safe to say that three months now feels like an eternity in markets. At the end of November 2023, Fidelity International was pricing in a 60% chance of a standard, cyclical recession. In recent weeks, strong disinflation forces and central bank language pivots have caused Fidelity to reprice its expectations dramatically.
Fidelity International's Global Chief Investment Officer, Andrew McCaffery, tells me that the chances of a soft landing have increased from 20% to 45%, and the chances of a no landing scenario have also increased from 5% to 15%.
And while that sounds like good news, there is a very important catch. McCaffery says he does not see the soft landing narrative and the six rate cuts currently being priced into rates markets as being compatible. He argues that any more rate cuts than the three that the Fed has projected may give the air of an impending downturn.
In this extended edition of Views from the Top, McCaffery sits down with me to discuss his views on global markets, why he thinks the negative European narrative is overdone, and what he makes of the stock market rout in China.
Timestamps
- 0:00 - Intro
- 0:44 - What has changed in markets and what hasn't changed over the last 40 years?
- 2:17 - Why 2024 in markets will really be a continuation of 2023
- 4:09 - Fidelity increases its likelihood of a soft landing from 20% to 45%
- 6:53 - Are 6 Federal Reserve rate cuts and a soft landing compatible?
- 8:12 - Fidelity's expectations for the Fed
- 8:57 - Is European and UK pessimism overdone?
- 10:26 - Are European stocks and credit investments more appealing?
- 12:15 - Why Fidelity prefer mid-caps to small-caps
- 14:37 - The outlook for fixed income assets
- 17:00 - Opportunities across emerging markets
- 18:35 - What looks appealing in Chinese equities
- 21:04 - Andrew's View from the Top
