Aviva Investors sees one in three chance of global recession and recommends cautious asset allocation

(London) Aviva Investors, the global asset management business of Aviva plc (‘Aviva’), expects weak global growth to persist next year, with a one in three chance that it could lead to a global recession. World trade and manufacturing are already at recessionary levels, in large part because of the ongoing spat between China and the US. The danger is growing that the slowdown could spread to the more domestically-focused service sector.

  • Equities position remains neutral due to low growth expectations
  • Modest overweight to Government bonds, credit and emerging market debt
  • US dollar overweight due to heightened risk aversion

In response, central banks eased monetary policy and adopted a dovish bias, a stance that is likely to be maintained throughout 2020. The absence of any significant inflationary pressure has made this adjustment more straightforward. World GDP is set to grow by around 3% this year and 2.75% in 2020 the lowest for a decade.

This weaker growth backdrop should create a headwind for equity markets. The easier monetary stance will provide some support, although this influence may be felt more within fixed income assets such as government bonds and corporate credit.

Michael Grady, Head of Investment Strategy and Chief Economist at Aviva Investors, said:

“Having marked down our economic outlook, and with increasing concern about downside risks, we are cautious about the outlook for risk assets, with a neutral allocation to equities.

“Our preference is for a modest overweight to sovereign bonds, credit and emerging market debt. Direct and indirect central bank actions should provide support and help mitigate the risks of a serious recession and default cycle.

“We continue to prefer to be overweight US dollars due to heightened risk aversion.”

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Important information:

Except where stated as otherwise, the source of all information is Aviva Investors Global Services Limited (AIGSL). As at 14 October 2019. Unless stated otherwise any views and opinions are those of Aviva Investors. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as advice of any nature. Information contained herein has been obtained from sources believed to be reliable, but has not been independently verified by Aviva Investors and is not guaranteed to be accurate. Past performance is not a guide to the future. The value of an investment and any income from it may go down as well as up and the investor may not get back the original amount invested. Nothing in this material, including any references to specific securities, assets classes and financial markets is intended to or should be construed as advice or recommendations of any nature. This material is not a recommendation to sell or purchase any investment. 

In the UK & Europe this material has been prepared and issued by AIGSL, registered in England No.1151805. Registered Office: St. Helen’s, 1 Undershaft, London, EC3P 3DQ. Authorised and regulated in the UK by the Financial Conduct Authority. In France, Aviva Investors France is a portfolio management company approved by the French Authority “Autorité des Marchés Financiers”, under n° GP 97-114, a limited liability company with Board of Directors and Supervisory Board, having a share capital of 17 793 700 euros, whose registered office is located at 14 rue Roquépine, 75008 Paris and registered in the Paris Company Register under n° 335 133 229. In Switzerland, this document is issued by Aviva Investors Schweiz GmbH, authorised by FINMA as a distributor of collective investment schemes.

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The name “Aviva Investors” as used in this material refers to the global organization of affiliated asset management businesses operating under the Aviva Investors name. Each Aviva investors’ affiliate is a subsidiary of Aviva plc, a publicly- traded multi-national financial services company headquartered in the United Kingdom. Aviva Investors Canada, Inc. (“AIC”) is located in Toronto and is registered with the Ontario Securities Commission (“OSC”) as a Portfolio Manager, an Exempt Market Dealer, and a Commodity Trading Manager. Aviva Investors Americas LLC is a federally registered investment advisor with the U.S. Securities and Exchange Commission. Aviva Investors Americas is also a commodity trading advisor (“CTA”) and commodity pool operator (“CPO”) registered with the Commodity Futures Trading Commission (“CFTC”), and is a member of the National Futures Association (“NFA”).  AIA’s Form ADV Part 2A, which provides background information about the firm and its business practices, is available upon written request to: Compliance Department, 225 West Wacker Drive, Suite 2250, Chicago, IL 60606

Aviva Investors

Aviva Investors is the global asset management business of Aviva plc. The business delivers investment management solutions, services and client-driven performance to clients worldwide. Aviva Investors operates in 14 countries in Asia Pacific, Europe, North America and the United Kingdom with assets under management of £346 billion as at 30 June 2019. RA19/1300/10102020

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