Rethinking the role of bonds – Recession is almost a certainty, but high and persistent inflation implies Federal Reserve easing is unlikely in 2023. Investors could consider adding high-quality fixed income to their portfolio.
Pricing the damage – Higher real-rates favor value-style equities. For those willing to step out in equity risk, small-caps may present attractive opportunities.
Living with inflation – Core inflation is unlikely to get back to pre-pandemic levels in the near term, which could make TIPS and infrastructure equities attractive investments.
The investing regime we have long known has changed. We believe that the regime of “lower rates for longer” has transitioned to a regime of “higher rates for longer” – bringing with it profound implications for portfolio construction.
Higher yields in fixed income means that investors may not need their equity allocations to work as hard, and within their equity allocations they can focus on earnings resiliency in the face of an uncertain economic environment.
In this investor guide, we pair our macroeconomic views and market positioning insights to identify investment opportunities to consider in 2023.
