According to some of the world’s biggest bond managers from Fidelity International to Allianz Global Investors, the United States is heading for a “nasty” recession. They’re sticking to their forecasts for a downturn that is “inevitable” and advise hedging any bets on risk assets.
“Something akin to a credit crunch is what I’m most concerned about,” said Steve Ellis, global fixed-income chief investment officer at Fidelity International, which manages $663 billion of assets. Central banks’ continued tightening shows they’re “fighting last year’s battle,” he said according to a report by Fortune.
The damage from 10 straight interest rate increases has been done and the collapse of three U.S. lenders in March was just a taste of the bigger crisis to come as central banks stay hawkish until something else breaks. Just last week, Canada and Australia delivered surprise hikes, putting some pressure on the Federal Reserve to follow at an upcoming meeting as inflation remains persistently high.
Mike Riddell, a portfolio manager at Allianz Global Investors, said that stocks, bonds, and corporate debt are mispricing the risks. He added that only inflation-rate swaps have the economic outlook right. The so-called one-year forward inflation rate is currently at 2.4%, or close to 2% when risk compensation for investors is factored out. That implies a “nasty recession” within the next six months, he said. “Our base case is for a moderate-to-deep recession — and potentially crises — as the unprecedented pace of global policy tightening seen over the last year starts to really bite,” Riddell said. He recommends being bullishly positioned in rates and bearishly positioned in risk assets like credit.
The “inevitable” recession is taking far longer to show up than many thought at the start of the year. It’s possible the economy may keep defying expectations too, as situations such as nonfarm payrolls surpassed all estimates and surged in May, surprisingly.
Another issue is that Americans are quickly becoming overleveraged. Credit-card balances, which hit $986 billion in the fourth quarter of last year, remained largely unchanged in the first quarter for the first time in more than twenty years. Normally they post a dip as people pay off their debts from the holiday season, according to Forbes.
“Consumers are stretched, so I’m not 100% sure that a soft landing is really realistic at this point,” said Patrick McDonough, a portfolio manager at PGIM. “The downside is becoming more and more likely, just because we’ve been propped up by consumers for so long.”
Article cross-posted from SHTF Plan.
The Biggest Threat to Your Retirement Is Actually a Very Good Thing
When you look at the headlines today, you’ll see experts in the retirement industry warning about big threats to your financial security:
- De-dollarization and the rise of BRICS
- Soaring national debt
- Unstable interest rates
- Weakened U.S. dollar
All of these are real concerns. But they aren’t the biggest threat to your retirement savings. The true risk isn’t political, monetary, or global.
It’s longevity.
Why Longevity Is the Silent Threat
For most of human history, the problem was the opposite — life expectancy was short, and few people even reached retirement. Today, thanks to medical advancements, healthier lifestyles, and better living conditions, people are living longer than ever before.
And while that’s a wonderful thing, it comes with a financial catch: Your retirement account has to last far longer than you might expect.
- A 65-year-old couple today has a 50% chance that one of them will live to 90.
- Some projections suggest that many of us will live well into our 90s, even 100+.
- This means your nest egg may need to stretch not for 15 years, but 25, 30, or even 40 years.
That’s where the real danger lies: running out of money before you run out of life.
The Retirement Equation Has Changed
While market volatility, debt crises, or central bank policies may feel like the scariest threats, they’re temporary storms. Longevity, however, is a structural shift. Every extra year of life is another year of expenses, another year of inflation erosion, and another year of financial pressure.
If your retirement plan doesn’t account for longevity, you could face tough choices later in life — downsizing, working when you’d rather not, or becoming financially dependent on others.
How to Take Control
The good news? Longevity is a blessing — as long as you’re prepared for it. With the right planning, your retirement savings can work for you instead of against you. The key is learning how to protect your wealth, outpace inflation, and ensure your savings grow even as you live longer.
That’s why our friends at Augusta Precious Metals created a free resource to help you get started:
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This brief report will show you practical strategies to safeguard your retirement from the biggest threat of all — the one that comes from the gift of living longer.
Don’t let longevity catch you unprepared. Take the steps today to secure tomorrow.