Global CIO video: "Fears of a recession are misplaced"
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Global CIO video: "Fears of a recession are misplaced"

Other than ringing in the new year, investors had little to cheer about last month and, in fact, last quarter. Worries over trade conspired with a surprise earnings warning from US technology bellwether Apple and the Federal Reserve's rate hike to stoke fears of a sharp slowdown or even an imminent recession, sending equity market volatility sharply higher.

Watch the new Global CIO video with Oliver Adler, Chief Economist Switzerland, to learn more about the recent market developments as well as our outlook for 2019.

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Fresh start

But a new year heralds a fresh start, and indeed investors appeared to regain some optimism in early January. Of course, there’s no disputing the fact that the global economy is slowing from the strong pace of 2018, but a recession is not on the horizon, in our view. Labor markets remain robust and the US Federal Reserve is likely to pause rate hikes until the second half of the year. On the trade front, we expect the USA and China to eventually reach a deal, as both sides have a strong interest in de-escalating the situation.

Room to rebound

This backdrop should be supportive of risk assets. Indeed, we see room for equities to rebound further. Regionally, we believe emerging market assets continue to look attractive. In fixed income, our neutral duration view now also includes CHF, EUR and JPY, and we no longer expect investment grade corporate bonds to underperform. Given weaker manufacturing activity, we are currently neutral on commodities.

For long-term investors, our Supertrend "Technology at the Service of Humans" provides interesting opportunities. Indeed, we currently see strong potential in virtual and augmented reality.

The importance of a clear strategy

Recent months have tested investors’ nerves, but they also served as a reminder of how crucial it is to have a sound investment strategy, including an appropriate strategic asset allocation (SAA), in place. At Credit Suisse, we review our SAA annually to ensure that portfolios remain well positioned.