Man Group analyzes economic scenarios and asset class implications

Asset manager Man Group PLC has released an analysis of the potential impacts of geopolitical tensions, particularly the ongoing war in Iran, on the global economy and financial markets.

The firm's base case anticipates a mild U.S. recession, driven by the Middle East conflict, tariffs, and rising unemployment. Increased commodity prices are pressuring the U.S. economy, especially consumers. Eurozone and Japanese economies are also expected to weaken due to higher commodity prices, but may see some benefit from fiscal stimulus.

China's growth is projected to remain below 5%, while the UK's growth is expected to be flat or slightly subdued. Emerging markets, particularly in Asia, are positioned to benefit from AI-related capital expenditures, a weaker U.S. dollar, and regional dynamics. Oil-exporting emerging markets stand to gain from higher energy prices. The U.S. Federal Reserve and most other developed central banks are expected to hold rates steady or tighten policy due to inflation concerns.

For investment opportunities in the base case, Man Group favors developed markets outside the U.S., especially the Eurozone, Japan, and select emerging markets. AI capex is expected to boost Asian equities, while commodity prices may benefit Latin American equities. UK equities could also perform well due to low valuations and high dividend yields. In fixed income, the firm prefers European credit and shorter-duration instruments. On currency markets, the Japanese yen and euro are expected to strengthen against the U.S. dollar.

In a downside scenario featuring stagflation and persistent high inflation, Man Group suggests focusing on defensive equity sectors, inflation-protected securities, and certain perceived safe-haven currencies like the Swiss franc and Japanese yen. Gold is viewed as a safe-haven asset in this environment.