Barron’s: “Michael Hintze Warns Trade War Could Spark Recession”

Barron’s reports on the mid-year review released by CQS founder and chief executive Sir Michael Hintze, which outlines his insights on the geopolitical factors impacting global markets. In the mid-year review, Sir Michael notes that economies and monetary policies globally are less synchronized and at different stages of their cycles. While indexes have pulled back, credit market valuations are still towards the tighter end of historical ranges, but what matters is that there is dispersion. In a post quantitative easing (QE) world there are winners and losers. It is a credit pickers’ market. There is dispersion of valuation across geographies and sectors, idiosyncratic opportunity at the issuer level and mispricing. There’s much opportunity both long and short. There also continues to be value in complexity. Sir Michael also addresses the potential impact of a trade war, noting:

“An all-out trade war would be damaging to the global economy and potentially recessionary. It is about game theory. Someone needs to flinch first and my sense is that President Trump’s desire to make good on his election promises ahead of the November mid-terms makes it unlikely that it will be him.”

The political gamesmanship may create bigger ripple effects: “The dollar appears to be being used as a unit of politics, as well as a unit for trade and commerce,” Hintze says. “In the very long-term, I fear that this has the potential to undermine the US dollar’s status as the global reserve currency.”

Read more: “Michael Hintze Warns Trade War Could Spark Recession” – Barron’s Further coverage:  “CQS' Hintze says duration sweet spot is two years or less” - Reuters