In Focus: Fixed income  

Bond manager on why he chose 'longest duration position ever'

"The market seems to have accepted that a recession is on its way, but there seems to be a widely held view it will not arrive until December at the earliest, and possibly not until well into 2023," he said.

"This is probably partly due to the strong US jobs market, and people just assuming the descent toward the next recession will follow historical precedent and be relatively leisurely."

But he said the jobs market was not a forward‑looking indicator, as he predicted any recession would "cut deeper than expected".

"The speed at which fundamentals have weakened this year have convinced me that this recession will come much quicker than we would usually expect," he said.

"Although household and corporate balance sheets are in good shape, meaning there are few imbalances in the economy, the number of headwinds the global economy still faces looks very ominous to me.

"There are further rate hikes to come, the war in Ukraine is rumbling on, China’s zero‑Covid policy is still in place, and the energy crisis has not been resolved. So, while I think the next recession may be short‑lived, I also think it may cut deeper than expected."

Earlier this month Schroders predicted the "worst year for global economy since 2009", as recessions were looming in the world's major economies.

It expects global growth to slow from 5.9 per cent to 2.6 per cent this year (revised down from 2.7 per cent) and to slow to 1.5 per cent in 2023 (previously 2.7 per cent).

Apart from during the height of the Covid-19 pandemic, this would be the worst year for the global economy since 2009, it said.

carmen.reichman@ft.com