Guyana is poised to sidestep the contractionary cycle that’s about to deepen into recession in global economies, says investment banker Gregory Fisher.
However, speaking at the first JSE Guyana Capital Markets Conference, held in Georgetown on Tuesday and Wednesday, he warned that fiscal prudence was key to the nascent oil economy achieving that outcome.
“My only word of caution is to ensure that fiscal stewardship be a part of the approach,” said Fisher, head of emerging markets, fixed income and wealth management at investment firm Jefferies LLC.
“Take lessons from other countries in the Caribbean – discipline and good partnerships are needed to sidestep errors,” he warned.
Saying the “global landscape has never been this chaotic”, Fisher asserted that a recession was pending, which he linked to actions of the US Federal Reserve, but expects it to be short-lived.
“The Fed hiked rates by 526 basis points in 16 months, and it will put pressure on all economies,” he said on the opening day of the conference, staged by the Jamaica Stock Exchange in conjunction with the Georgetown Chamber of Commerce and Industry.
Market pundits believe the pressure will result in a hard landing, that is, a recession.
“This rapid tightening cycle puts us on a more normalised cycle. There is a risk of recession, but seasoned investors will remember that recessions are normal and only last for up to 24 months.”
The investment bank said the United States remains in a recessionary bear market cycle, but the Fed was comfortable that its rate hikes have served their purpose of cooling down inflation. The annual US inflation rate inched up by 50 basis points in August to 3.7 per cent, peeling back more of the gains since June when inflation had dipped to 3.0 per cent. The Fed’s target range is 2.0 per cent.
“It aims to ensure that the inflation synthetically created by the pandemic is gone,” Fisher said of the Fed’s actions.
Inside the United States, the rate hikes have been blamed for the collapse of at least two banks, and there is consistent discussion around whether the Fed can engineer a ‘soft landing’ for the economy, that is, managing the rate hikes so as not to cause a deep economic recession.
“This is a time when many investors are not sure what to do next. Recession is a bridge, a natural occurrence that many have not faced before. The US will head towards some form of contraction. When it arrives, the Fed can then accommodate to it,” he said.
It’s up to investors to look at defensive investments to weather the current environment, Fisher added.
The Guyana conference marked the first staging of the JSE Regional Investments and Capital Markets confab outside of Jamaica. Fisher and the firms he works for, first Oppenheimer and now Jefferies, have long been associated with the confab. The American firms and NCB Capital Markets are regular sponsors.