Schroders expert: US recession not imminent

  • Golden rule: Caspar Rock, chief investment officer of Schroders Wealth Management, advises investors to focus on time in the market, rather than timing the market

A recession in the US is unlikely to happen this year or next, Schroders Wealth Management’s chief investment officer said.

Caspar Rock was speaking to an audience of investors at a special event in Hamilton to mark 50 years of Schroders doing business in Bermuda.

After the event, Mr Rock told The Royal Gazette: “If a recession does happen in 2020, it won’t happen in the first half of the year.

“We are seeing strong wage growth and real interest rates not much above inflation. That’s a really important point.”

High interest rates, relative to inflation, had often portended a recession in the past. With the US Federal Reserve signalling a slowdown in rate increases this year, there was little to

Schroders is a London-based investment house, founded in 1804, which managed $536.7 billion for clients as of the end of last year.

The company arrived on the island in 1969 when it formed a subsidiary to focus on managing institutional and private wealth, having been attracted by the island’s robust legal framework built around English common law.

The late Bruno Schroder, who died in February this year, was the founding family patriarch at that time and was very involved with the Bermuda operation, having fallen in love with the island.

The principal attractions of doing business in Bermuda have not changed much from 50 years ago.

Mr Rock said: “We are very selective about where we operate. We see opportunities for all sorts of business here: families and trusts and also the institutional side with the big insurance industry here.”

He added that he had not heard of any concerns expressed by investors about Bermuda’s presence on a European Union list of noncooperative jurisdictions on tax matters and was hopeful the issue would be resolved this month.

Mr Rock was speaking before Curtis Dickinson, the finance minister, said last week that he expected the island to be removed from the list on May 17, when EU finance ministers meet.

Asked what advice he would give retail investors, Mr Rock said: “Invest for the long term, don’t think there is a fast buck to be made. It’s all about time in the market, rather than timing the market.

“It’s important to be diversified — don’t put all your eggs in one basket.

“Have some sort of valuation discipline, because when you’re buying something expensive [in terms of its price to earnings ratio], you have to be really, really sure.

“Be aware, that when sentiment is very bearish, that is often the best time to buy. If the car dealer if offering a Mercedes at a 20 per cent discount, people are more likely to buy it. Yet many people think differently when stocks are cheap.

“When the market’s fallen 20 per cent, people seem to think it’s more risky to buy stocks and that can actually be the best time to buy.”

The 50th anniversary event took place at the Hamilton Princess and Beach Club last Thursday before a packed room of invited guests. Mr Rock spoke, followed by Major General Patrick Marriott, retired commandant of The Royal Military Academy Sandhurst, which he led from 2009 to 2012, who spoke about the importance of moral courage in leadership in both the military and business environments.