US Markets
Thursday, September 28th, 2023 2:06 pm EDT
Key Points
- A recession is all but inevitable for the U.S., and investors should be playing defense in that kind of environment, TCW CEO Katie Koch said.
- Koch said the Federal Reserve’s interest rate hikes targeted at slowing the economy and bringing down inflation will start to bite.
Katie Koch, CEO of the TCW Group, predicts an impending recession in the U.S., marking the first significant downturn in over 15 years. Despite a resilient consumer base and a robust labor market that have propped up the economy, Koch believes that the Federal Reserve’s interest rate hikes, aimed at curbing inflation and slowing economic growth, will eventually take their toll.
Koch advises investors to adopt a defensive strategy in preparation for the impending recession. She recommends a cautious investment approach, including holding cash, agency debt, mortgage-backed securities, and Treasuries. Additionally, she favors companies with long-term capital investments.
Expressing concern, Koch highlights the potential struggles for both consumers and businesses that have deferred paying down their loans, referring to this as the “extend and pretend strategy.” She emphasizes that the stability of the U.S. economy has historically relied on the financial health of consumers and small to medium-sized enterprises, suggesting that these entities may face challenges securing financing in the impending economic environment. This outlook leads her to take a relatively bearish stance on the overall economic climate.
For the full original article on CNBC, please click here
