Expect a few quarters of recession in the US, but things could start to turn around by next summer, provided the grip of the credit squeeze is eased.

That is the view of Brown Brothers Harriman (BBH) partner Jeffrey Schoenfeld, who was speaking to an international business audience at the Fairmont Hamilton Princess on Friday.

At a seminar presented by BBH, America's oldest privately owned bank, on the impact of the credit crisis on Bermuda's insurance sector, Mr. Schoenfeld said these times were unprecedented — both in terms of market turmoil and with regard to investment opportunities.

"We see several quarters of recession ahead," said Mr. Schoenfeld, an expert in institutional fixed-income investment.

"We are already seeing the beginning of protracted retrenchment by consumers after years of overspending.

"If the capital markets start working again and the banks start lending again, then it could come back by next summer — if not, it will take longer."

In an interview after the seminar, Mr. Schoenfeld said investors should expect an uptick in the market long before it is apparent that the economy is growing again.

"Risk assets such as equities will turn up in price well before improvements are obvious in economic data — probably three to six months before," Mr. Schoenfeld said. "Historically, that has been the case in other cycles."

Most insurance companies have seen an erosion of the value of their investment portfolios as market turmoil has taken its toll. Mr. Schoenfeld said one lesson learned was a lack of basic research meant that the underlying risk of apparently safe investments had, in many cases, not been spotted.

Structured securities, backed by a pool of assets that sometimes included risky sub-prime mortgages, had been given triple-A ratings from credit ratings agencies, persuading insurers and other investors into believing they were "safe".

"There was an appearance of conservative investing," Mr. Schoenfeld said, adding that both the ratings agencies and the investors had been at fault for failing to do sufficient research to appreciate the true risks of the investments.

"There is now a renewed need for people to do their own homework and analysis on securities," he said. "The risks of relying on a third party to do your homework for you have become very evident." A complete review of the credit ratings agencies system was needed, he added.

Mr. Schoenfeld and some of his colleagues at BBH make regular visits to Bermuda to visit investment clients here. He did not believe there would be any immediate threat to the Island and other offshore jurisdictions, when Barack Obama takes office as the new US President in January. President-elect Obama promised in several campaign speeches to "shut down the tax havens".

"I think he'll have so many other priorities that offshore jurisdictions will be way down the list," Mr. Schoenfeld said. However he added that a renewed focus on combating money laundering and the financing of terrorism could have significant repercussions for offshore centres.

"Going forward, the world is going to have a more globalised regulatory framework than it does today," Mr. Schoenfeld said. "In that world, the big countries are going to set the regulatory architecture. And there will be less scope for others to innovate, unless it is towards more conservative regulation."

In his presentation at the seminar, Mr. Schoenfeld pointed to corporate bonds issued by high-quality companies as one way of generating good returns right now, and he also saw long-term upside in equities, describing now as "a once in a generation opportunity" to buy into companies well set to survive the downturn and prosper in the future.

BBH senior currency strategist Win Thin also said equities were a "huge, long-term buy" and was bullish about the US dollar's prospects.

He highlighted several things to look out for in order to the economy to improve — a fall in inter-bank lending rates and volatility; stabilisation of emerging markets; and the US housing market bottoming out.