- Bob Parker, senior advisor at the International Capital Markets Association, said investor confusion appears to be becoming a big issue in financial markets.
- Fears of an impending recession appear to be growing, while many economists have been predicting a contraction in 2023.
- “I think there is now a general pessimism about where the global economy is going,” Giles Keating, director at Bitcoin Suisse, told CNBC’s Squawk Box Europe on Thursday.
Market participants grapple with the risk of persistently higher inflation and a bleak economic outlook, which strategists say is fueling a heady mix of confusion and pessimism.
It comes as investors eye a fresh set of US economic data that will provide further clues as to whether inflation is cooling and whether the Federal Reserve is likely to announce another rate hike at its next meeting in early May.
Bob Parker, senior advisor at the International Capital Markets Association, said investor confusion appears to be becoming a big issue in financial markets.
“If you look at the polls of investor positioning and investor thinking, there’s a lot of confusion right now,” Parker told CNBC’s Squawk Box Europe on Wednesday.
“Is inflation going down fast or not? To what extent is the US economy slowing down and with it the European economy? And what are the risks of a recession?” Parker said.
“Given these uncertainties, I think investors are de-risking right now and quite frankly posting decent year-to-date gains.”
Parker said many investors took profits on the “good returns” recorded year-to-date in both the US and Europe as “first quarter earnings are clearly going to be very negative.”
Traders work on the floor of the New York Stock Exchange on April 21, 2023 in New York City.
Spencer Platt | News from Getty Images | Getty Images
Looking ahead, Parker said the theme for May and June will likely be a rotation into year-to-date underperforming stocks “related to value and defensive sectors and profit-taking in cyclical and growth sectors.”
Value stocks are those that are believed to be trading below their true worth, while defensive stocks tend to provide stable returns regardless of the state of the stock market.
Cyclical stocks, viewed as the opposite of defensive stocks, generally follow economic cycles. Growth stocks refer to companies that are expected to outperform the broader market.
Fears of an impending recession appear to be growing, while many economists have been predicting a contraction in 2023.
Earlier this month, the International Monetary Fund published its medium-term weakest global growth forecasts in more than 30 years.
The Washington, DC-based institution said global growth is likely to be around 3%, meaning the global economy is not on track to return to pre-coronavirus rates in the medium term .
Gita Gopinath, the IMF’s first deputy managing director, has since said that risks of a so-called “hard landing” remain even if the US economy avoids a recession.
Asked whether a downtrend in oil prices could be interpreted as a gloomy economic barometer, Giles Keating, a director at Bitcoin Suisse, told CNBC’s Squawk Box Europe on Thursday, “I think there’s a general pessimism now about where the world economy is going.”
He added: “I don’t think things are that bad. There’s too much concern now about a problem with one bank – and that’s not the same as a problem in the banking sector as a whole, so I think oil is exaggerating the pessimism here.”
His comments referred to another sharp drop in First Republic’s stock. The troubled San Francisco-based lender was viewed by investors as a risky bank after the collapse of Silicon Valley Bank, which had a similar financial profile, last month.
– CNBC’s Alex Harring, Hakyung Kim and Jesse Pound contributed to this report.
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