Does an economic downturn impact markets?

Morningstar Investment Management's Mark Preskett says that investors who sell growth assets over recession fears may be being hasty

Mark Preskett 6 February, 2019 | 6:00PM

One of the narratives from the recent market downturn was the growing risk of a global recession. Following around 10-years of economic expansion, the US saw consumer confidence soften, equities slide, and corporate profits disappoint to close out 2018.

China, meanwhile, caught headlines as it posted its slowest economic growth since 1990, albeit at a healthy rate of 6.6%, with many CEOs there sharing their concern over the economy. And in Europe, of course, Brexit and other geopolitical uncertainty has the continent on edge.

Most of the questions voiced thus far are: 1) What might cause the global economy to slow considerably or enter a recession? 2) How severe could a downturn be? For investors asking these questions, the logic is presumably that if economic growth is at risk, you might consider selling growth assets. However, for investors with long-term goals, we think this approach may be short sighted.

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Mark Preskett

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