Rob Arnott says there's now an 80% chance of a recession amid a credit crunch. Here are his top recommendations on where to park your money — including one trade he believes will deliver 15% yearly returns over the next decade.
, tips his cap to the Federal Reserve acting to prevent contagion in the financial system amid bank closures last month, though he says the central bank caused this stress by aggressively raising interest rates and inverting the Treasury yield curve. But he said that a result of the Fed not preventing bank failures would be a pullback in lending from financial institutions as they fight to stay liquid. a recession? Yes.
He believes that the Fed should drop short-term rates to about 1% below the 10-year Treasury yield, and generally keep them there going forward in order to prevent recessions.While Arnott said the S&P 500 may not have a lot of downside given that it sold off by as much as 25% last year, he also believes growth stocks – which make up a large percentage of the index — remain overvalued. "Value reached record cheapness relative to growth in the summer of 2020.
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