Next recession could strike during 2020

Two JPMorgan strategists reckon they have the answer to when, how it will strike

HChang and Jan Loeys wrote. Actively managed accounts make up only about one-third of equity assets under management, with active single-name trading responsible for just 10 per cent or so of trading volume, JPMorgan estimates. This change has “eliminated a large pool of assets that would be standing ready to buy cheap public securities and backstop a market disruption,” Chang and Loeys warned.

One silver lining is in the recent rout in emerging markets: It means assets in developing countries have cheapened this year, helping limit the peak-totrough declines during the next crisis and offsetting a build-up of leverage, Normand and Manicardi wrote. Besides the liquidity question, the duo highlighted the length of the next downturn as a critical unknown in gauging how bad things will get. The longer a recession lasts, typically the bigger the hit to markets, their analysis shows. “The recession’s duration is a powerful drag on returns, which should dovetail with concerns that policymakers lack the necessary monetary and fiscal space to extract economies from the next recession,” they wrote.