Despite a potential slowdown in US economic growth next year, the world's largest economy is unlikely to fall into a recession because the Federal Reserve will probably cut rates to shore up growth momentum, says the Investment Analysts Association.
"Normally, when there is an economic bubble, it will come from two reasons: a property bubble or a fragile financial sector," said IAA chairman Paiboon Nalinthrangkurn. "The US currently has no problems related to these two factors, but the economy will slow down as a result of the trade war impact.
"My personal view is the US will not go into a recession, because the Fed has already prepared measures to handle such a situation. The Fed will likely raise interest rates until next year and will slash the rate in 2020 to stimulate economic growth."
The key concern is that the Fed still has not changed its stance on further rate hikes amid rising concerns over the trade war, considered a double whammy for global economic growth outlook, Mr Paiboon said.
"We will have to watch how the Fed reacts to the trade war," he said. "If the US economic recession and a global economic slowdown occur simultaneously, this could induce a 20% correction in the global stock markets, but I don't think the Fed will ignore such prospect."
In the event of another global economic slowdown, European economies will be the most worrying, since the euro-zone countries will have fewer measures to handle the downturn. The European Central Bank has already implemented a monetary stimulus programme to boost inflation and growth in the bloc.
Fund outflows from the Thai stock market, meanwhile, are about 260 billion baht year-to-date, but most of them are identified as short-term funds such as exchange-traded funds and those using algorithm trading, with a policy to track the trend of the SET index, Mr Paiboon said.
The IAA still has a positive outlook on equity investment, due to the fact that there remains a surplus in global liquidity over the past 10 years on the back of the Fed's quantitative easing measures.
Mr Paiboon said the peak of the Fed's monetary stimulus programme was in 2015 at US$4.5 trillion in asset purchases, while current global liquidity is about $4.17 trillion.
Foreign funds are expected to shift back into emerging-market stocks after there is a clearer negotiation between the US and China over their trade disputes, he said.