Guy Wagner from BLI states that recession risk still low despite economic slowdown


Luxembourg, 7 February 2019 – Although recent economic statistics continue to reinforce the
idea that the global economy is slowing, for the majority of countries, a recession does not
appear to be imminent. This is opinion of Guy Wagner, Chief Investment Officer at BLI -
Banque de Luxembourg Investments, and his team, in their monthly analysis, ‘Highlights’.

In the United States, the job market remains robust, job creation proving particularly strong in January
despite the government's partial shutdown. In Europe, the slowdown is more explicit: “During the last
three months of 2018, eurozone GDP only increased by 0.2% over the previous quarter, the slowest
pace for four years”, indicates Guy Wagner, Chief Investment Officer and managing director of the
asset management company BLI - Banque de Luxembourg Investments. “Japanese growth is heavily
dependent on the outcome of the US-China conflict which is discouraging investment expenditure in
China and, consequently, demand for capital equipment manufactured in Japan.” In China, the
authorities are reacting to the economic slowdown with monetary and fiscal stimulus measures that
are likely to have a favourable impact on growth towards the middle of the year.

USA and Europe keep their monetary policy unchanged
As expected, the US Federal Reserve left its interest rates unchanged after the monetary policy
committee’s first meeting of the year: the upper limit of the federal funds rate remains at 2.5%. ”The
monetary authorities nevertheless modified the message about their future intentions, indicating that
they would now take a patient approach to further rate hikes whereas, previously, they had declared
their aim of keeping a rising path”, underlines the Luxembourgish economist. By way of justification,
Fed Chair Jerome Powell cited the multiple adverse economic winds such as the slowdown of the
Chinese and European economies, uncertainties over Brexit, the trade war with China and the partial US government shutdown. In Europe, the Governing Council of the European Central Bank kept its monetary policy unchanged at its first meeting of the year.

Equity markets rebounded sharply in January
After December’s significant correction, equity markets rebounded sharply in January. Over the month,
the S&P 500 in the United States, the Stoxx 600 in Europe, the Topix in Japan and the MSCI
Emerging Markets recorded very positive performances. “In terms of sectors, the rebound was also
fairly consistent, the best sector being energy, while, bringing up the rear, even utilities posted a
decent rise.

Government bond yields continued their downward trend

The equity markets’ significant rebound in January did not prompt a reversal on the bond markets, as
government bond yields continued their downward trend. The yield on the US 10-year Treasury note
eased slightly while the eurozone 10-year benchmark yields declined even further. “The prospects of
economic slowdown and a further reduction in inflationary pressures are keeping long-dated yields at
low levels”, concludes Guy Wagner



BLI - Banque de Luxembourg Investments S.A. is the asset management company of Banque de Luxembourg, which houses the bank’s expertise in fund management, analysis and securities selection. BLI' also stands for 'business-like investing', which describes our approach to the securities selection process. BL funds are regularly singled out at numerous awards. BLI manages and distributes a range of more than 30 investment funds with focus on wealth management funds. Assets under management were 10.92 billion EUR on 30/11/2018.

Since 1920, Banque de Luxembourg practices its private banking profession from the Grand Duchy of Luxembourg and has been a key player in wealth management. The bank serves family entrepreneurs and accompanies them in important moments of their lives to manage their wealth permanently, but also to support them while realising projects with the highest level of discretion. Banque de Luxembourg owns 986 million euro of net assets and manages 74 billion euro (figures as of 31 December 2017). Banque de Luxembourg has 900 employers and is one of the rare banks whose investment strategy is developed by its own analyst team in Luxembourg, at the affiliate BLI.

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