Richard Woolnough: «Die Märkte marschieren nicht immer im Gleichschritt»

Richard Woolnough

Richard Woolnough, M&G Investments

The US economy is struggling with falling prices for oil and other commodities as well as a slowdown in China and higher interest rates in their own country. Controls they thus a recession?

By Richard Woolnough, a fund manager at M & G Investments

Economists speak in their analyzes at the "natural" level of unemployment. In this context, one might assume therefore that a "natural" sound barrier to workforce reductions exists, which must not be undershot by an economy. Or in other words: There will always be suffering distress employers who do not pass a downsizing.

For the current analysis could be based close that is "natural" value to 0.02 percent. In this context, the US labor market would be in a continued strong position.

Exceptionally accomodating

Would the US economy close to a recession, subject certainly some evidence before. Finally, are the price of oil for more than a year and the Chinese stock market for nine months in a bear market. Raw materials from the mining sector for two years already bobbing in front of him and the small increase in interest rates the Fed arrived late and was anyway expected for a long time.

The economic reality is that falling oil prices help the economy, falling commodity prices are more a supply and a demand issue, the Chinese economy has no significant input in the US economy and the policy of the Federal Reserve continues to be exceptionally accommodating.

stay alert

Stock markets, commodity markets and further economic march not always in step. The US central bank should not depend on these indicators their focus. The mandate of the Fed is rather to focus on the labor market.

You should therefore remain vigilant and not be distracted by market noise that do not have drastic long-term effects on inflation or short-term impact on the labor market.

Spreads near recession levels

Right now, some people ensures the state of the US economy and its capacity to cope with falling prices for oil and to defy other commodities, the economic slowdown in China encounter or the rate hike by a quarter point (yes, a quarter point!) digest. As first, given the current market sentiment, a doubling of US interest rates will hit on the minds?

The spreads on high-yield bonds are close to recession levels. But this situation is distorted by the energy sector. The production side of the economy is clearly on the decline, but the service for US growth of greater importance and shows significantly better performance - even if the ISM services index is still far from the highs of recent times.

Not by a long inverse

The US yield curve is far inversely, what is historically considered an indication of a recession, but it has flattened and has to be steeper.

I think that the Fed remains on a Zinserhöhungs course. You should also focus on because those data, the expectation of a strengthening of the labor market.

Not rare measure

If the outlook from the perspective of industrial production to be gloomy, so the company would take a not uncommon measure and lay off employees. The private sector has the least percentage fired in the last 15 years.

This is a sign for the sustainable labor market strength, and the few staff reductions indicate a sustained and healthy trend in unemployment figures down.


Richard Woolnough joined M & G in early 2004 and is the manager of various funds. His professional career began in 1985 at Lloyds Merchant Bank, then changed in 1987 to the Italian insurance group Generali. Later worked for the bank SG Warburg and from 1995 for Old Mutual, where he was manager. Woolnough graduated from the London School of Economics from a BSc in Economics.

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