We read market outlooks from these 17 banks and hedge funds so that you don’t have to:
- Goldman Sachs https://lnkd.in/eKzF_2K4
- J.P. Morgan https://lnkd.in/eHb6-622
- Morgan Stanley https://lnkd.in/e2nAMjmM
- Bank of America https://lnkd.in/e8XFD8TW
- BlackRock https://lnkd.in/eYxCBRGj
- HSBC https://lnkd.in/eNfBiJvH
- Barclays https://lnkd.in/eRT4dsFY
- NatWest https://lnkd.in/euftbUw6
- Citi https://lnkd.in/eXwA-Y4X
- UBS https://lnkd.in/exudCU6V
- Credit Suisse https://lnkd.in/e4CEK5NZ
- BNP Paribas https://lnkd.in/ec4hWEdm
- Deutsche Bank https://lnkd.in/eAWCSV_7
- ING https://lnkd.in/eNpdmVH8
- Apollo Global Management, Inc. https://lnkd.in/ewwq_62M
- Wells Fargo https://lnkd.in/euMkQnKE
- BNY Mellon https://lnkd.in/ezMfVgND
- Fidelity International https://lnkd.in/eJwK6tVx
- Lazard https://lnkd.in/eku-xhqp
Here’re 5 key takeaways:
i) Recession: Is it coming for us in 2023?
The pros can’t seem to agree – some think there’ll be a recession, others think the US will dodge it. But, everyone agrees that the ball is in the Fed’s court. And surprisingly, most think that the economy should recover by late or end 2023.
However, all the reports also seem to agree that inflation will likely slow or hopefully remain constant. But it will not come back down anytime soon.
ii) Will Tech Stocks recover soon?
“At their peak in 2000, the five largest tech-related stocks comprised just over 20% of the S&P 500. Those same stocks bottomed five years later, dropping to only 5% of the S&P 500”
Morgan Stanley 2023 Investment Outlook
By now, most are away that the increased cost of capital has hurt tech stocks, especially those who are loss-making.
Does that mean the mega tech stocks (Microsoft, Alphabet, etc) will recover sooner?
Well, not quite.
On top of the increasing cost of capital, the mega tech stocks have to handle increasing regulatory scrutiny. One example is Microsoft’s acquisition of Activision Blizzard.
iii) Is China still investible?
While most reports agree that China remains investible, they warn of the uncertainties arising from its Covid reopening and its large budget deficits. Investors looking to invest in China should also keep an eye on the evolving US-China relationship.
Despite the headwinds, most reports are surprisingly optimistic about China’s growth and recovery in 2023. Most forecasts that although China’s growth would slow compared to previous years, it would experience a greater GDP growth than the US and Eurozone in 2023.
That said, you’ll need to be highly selective if you wish to invest in China stocks.
iv) 5 Favored Sectors
Several reports pinpointed some sectors that could do better in 2023. These five were repeated throughout several reports:
- Financials: higher interest rates can continue to boost the earnings of this sector. Banks appear to be more resilient in this cycle too.
- Consumer Staples & Utilities: These sectors tend to be more defensive. Cost of inflation is also often passed onto the consumers.
- Energy: Supply issues may persist and should prices spike again due to any global events, this sector may benefit.
- Healthcare: most believe that this sector would remain defensive in a volatile macroeconomy.
- Information Technology: Software and services with recurring revenues may shine, if they are able to manage their margins in 2023.
v) Which Asset Classes should you put your money in?
For a long time before 2022, there was a “There is No Alternative (to equities)” (TINA) notion as the stock market seemed to be on a non-stop upward trajectory.
This year, TINA has now become TAPA (There Are Plenty of Alternatives).
As interest rates rose, fixed income products started to offer better yields. We saw the popularity of T-bills and SSBs rise as their yields started to rival those of longstanding S-REITS. Heck, even the safer option of putting money in savings accounts seems to offer better rates than stocks and bonds.
But how long would this last?
While every report seems to agree that high yields in fixed income will not last forever, they also agree that equities will continue to fall in early 2023, and that bond yields will remain attractive.
You should keep an eye on the US Yield Curve.
Side note: Property investors should keep an eye on rates and manage their debts accordingly. Most reports are optimistic that the demand of the rental market would hold, but are wary about falling house prices.
Okay, so what should you do now?
Continue to keep an eye on the Fed’s interest rate announcements.
In the meantime, try to balance between equities and fixed income (i.e. don’t go all into illiquid long term government bonds if you’re bullish on the recovery of stocks).
It might also be a good time to scoop up high quality dividend stocks like the longstanding dividend aristocrats that managed to increase their dividends even in 2022.
Many reports also suggest investing in higher quality companies with strong pricing power.
“We define pricing power as the ability of a company or sector to pass costs on without a significant impact on margins and/or earnings. We recognize, however, that due to a wide variety of factors (e.g., market structure, location), not all sectors or companies are equally able to pass on costs and stay ahead of the curve.”
Credit Suisse Investment Outlook 2023
Overall, the sentiment seems to be cautiously optimistic. Most think that the market has priced in recent events. However, they would continue to watch how key events (Fed’s Interest Rate Hikes, Russia-Ukraine conflict, supply chain issues, etc) unfold before making any moves.
That said, timing the market bottom is a challenging task even for the pros. You may be better off dollar cost averaging.
We’ve also invited our trainers to share how they’ll be positioning their portfolios in 2023. Join us on 14th Jan to hear from them live.
