Credit Investors Concerned About Anticipated Global Recession

Bank of America Merrill Lynch (BAML) conducted a survey with European financial managers that showed fear regarding a potential global recession. Around 20% of the participants said that the risk of weakened economic performance across the globe is a huge concern for them. This figure is significant as it is the biggest agreement expressed for a particular risk since 2017, according to Bloomberg.

According to the BAML survey, other issues that concern credit investors includes Brexit.

The Threat of Worldwide Recession

With the risk of a global economic slump, investors are hesitating to invest towards the end of December 2018. Moreover, the International Monetary fund and other leading financial institutions are predicting slow growth in 2019 and beyond.

Meanwhile, firms listed in the global stock markets dropped by $14,889,930,106,680. This is a steep blow seeing that the highest combined value of the companies is $87,289,962,917,450.

Warning Signs from Bond Markets

Whilst the credit market has expressed concern for this anticipated crisis, bond markets have also shown signs that point to it. One of the indicators of an impending recession is a ‘spread’ between 2-year and 10-year yields from bonds, according to Business Insider. These bond yields dropped drastically to an all-time low in December 2018 after 11 years.

Moreover, Deutsche Bank predicted a ‘very low’ chance of recession in 2019, but this percentage may increase up to 80% in three years. The only good news is that experts predict a minor drop should a recession does happen.

With this, many parties are looking into what could increase the probability of the crisis. Experts pointed towards further drops in oil prices, among other things. Meanwhile, some experts believe that these concerns could only worsen the blow in case a recession actually happens.