Tuesday , July 27 2021

Dark signs on the farm: here is a new accident?

This year, bonds and bonds are performing poorly too, so many have been hammered for another recession. Regarding the nature of the economic cycle, however, we are still in the recovery phase, so it may take up to 1-2 years until the economic downturn. However, in the current phase, extreme movements and even smaller or larger losses can be expected, so investors do not have to see the momentum of individual assets but the long-term benefits of the entire portfolio.

This year, both the bond and stock markets performed well, and even the negative results that occurred, so many people were worried about the crisis due to the new crisis – informing K & H Fund Management.

Because of the nature of the economic cycle, it often happens that the performance of two asset classes is different or both perform poorly, so the image needs to be taken in the long run and the place where the current economic cycle is concerned: the current fall is more a correction or a bear market starts in conditions. To get this answer, the performance of the world economy, the actions of central banks and market processes must be taken into account

– Mátyás Kovács, senior portfolio manager at K & H Fund Management, points out.

While the world economy is expected to grow 3.7 percent next year, and 2.5 percent growth in the US economy, the euro zone which is currently performing weaker performance also expects a 1.9 percent increase, a clear increase. Meanwhile, the rising shortage of labor is, in addition, a warning sign for a cycle, but inflation has just begun, which in turn, clearly shows a mature phase of recovery rather than recession.

Although the central bank, which has a role for the US central bank, continues to raise interest rates, the European Central Bank will close its bond-buying program by the end of this year. This warning shows that economic growth has stabilized on foot without stimulus measures from central banks.

Similarly, the decline in the stock market has occurred in recent years, so this is actually a correction, while in the long term there is still an increasing trend. European bond yields are still in the bond market, but US yields have increased, which is a typical recovery phase.

Overall, we see that the economy is always circling and remains what we are now in the recovery phase. However, this can last for 1-2 years, so instead of panicking, two things must be matched: on the one hand strong exchange rate fluctuations remain with us, and on the other hand, one or more investments in this volatile market environment can show minus or at least a smaller profit than one or two years ago. What is the most striking solution in this case, if we don't see an investment asset, but want to benefit from our long-term portfolio of investment portfolios

– investment experts recommend.

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