According to analysts at HSBC, markets are pricing in a recession. 

However, they added that markets are still creating buy opportunities, spotting “dislocations in equity markets,” as quoted by CNBC.

“Talk of a shift toward stagflation is building, but we would argue equity markets price action is more indicative of trading for a recessionary outcome,” they said. “Our regime models show the equity market is now pricing a 35% probability of recession, up from 10% just two weeks ago, while the implied likelihood of stagflation has barely moved, holding at 8%.”

Some of those “dislocations” can be found in oversold markets such as Korea, South Africa and Indonesia, where “valuations that look increasingly attractive, especially as our work shows these markets are not among the most exposed to higher oil prices.”

That being said, investors may want to look into ETFs for each.

For example, with South Africa, investors may want to look at the iShares MSCI South Africa ETF (EZA) which just fell from about $82 to a recent low of $64.93. With Indonesia, we can look at the iShares MSCI Indonesia ETF (EIDO), which is oversold at $15.33. With Korea, we can look at the iShares MSCI South Korea ETF (EWY), which is already starting to pivot after dropping.

Sincerely,

Ian Cooper