KUALA LUMPUR (Oct 3): While there are legitimate concerns over the strength of the global economic recovery, investors should not be preparing for a recession in 2020 but a slowdown that could resume its growth trajectory, according to an investment expert.

Todd Jablonski, chief investment officer of Principal Portfolio Strategies, an investment boutique within Principal Global Investors, told reporters on the sidelines of the Principal Asia Summit here today he does not expect a global recession in 2020, as there are indicators that show the slowdown could level off with potential increases thereafter.

"We have seen three separate slowdowns since the global financial crisis. Since March 2009, we have first had the European sovereign debt crisis that was approximately a 20-month slowdown, secondly we had noise in 2017 around commodities and that was a 17-month slowdown.

"The current (and third) slowdown is sitting at 20 months now. Based on the macroeconomic data that we see, particularly around the Organisation for Economic Co-operation and Development (OECD) indicators in Asia, it gives us a perspective that says we see a flattening in that negative trend, and that gives an opportunity in the fourth quarter of 2019 into the early 2020, we think, for the economic landscape to improve," he added.

According to Jablonski, recession risks are not overplayed, but instead, reasons for optimism are 'under-blown'.

"I do not see the current slowdown ending in crisis. There are always exogenous 'shock risks', and I would say that those risks are more pronounced than usual, particularly around what I call 'tweet risks' or other 'trade risks' that can actually affect the market. And with risk velocity increasing, those events can be priced into the event more quickly.

"[But] the Chinese government has stopped tightening its lending standards, we have seen a rebound in the OECD indicators for our five key Asian countries (China, India, South Korea, Japan, Indonesia) that give us optimism for the future. Those things I think should be trumpeted a bit more loudly — as well as the strength of the consumer and service sectors — to give investors some comfort that it's not necessarily a recession they should be preparing for, it could just be a slowdown that resumes to a growth trajectory," he explained.

In the face of a slowdown, Jablonski encouraged investors in Malaysia to return to strategic asset allocations by assessing their risk appetite, before making tactical deviations, and to adopt a defensive posture by reducing the standard deviation of returns, emphasising large caps, stable quality firms, and emphasising the better quality ends of fixed income.