Stocks withstand Russian invasion, but recession could be fatal

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Should pressure on economies cause a full-blown downturn, it will be harder for equities to stay resilient

Stocks in developed markets showed they can stand up to a lot last week. One thing they almost certainly can’t withstand is a global recession.

US stock futures plunged as much as 2.9% on Monday, erasing gains from late last week as speculation that central banks would throttle back on tightening policy gave way to worry that the geopolitical crisis in Europe could slow global economic growth.

For MKM, if the economy is not set to enter a recession, then the market’s lows should more or less be in. “If we are not entering an economic recession, we should use the playbook of a correction inside a structured bull market,” O’Hara said. China, seen as a bastion of strength by some, has its own weak points: a highly indebted property market, various industry crackdowns, and uncertainty over strict policies to try keeping Covid-19 cases near zero.

 

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