Equity markets: what will happen in 2023? There is growing optimism about the possibility of a rally in global equities, but the growth of stocks is limited by factors that are still uncertain. Here are the estimates.
What will 2023 be for shares? Investors are carefully observing economic and financial signals at this year’s end, hoping for signs of optimism for the coming months.
Volatility could still dominate the Exchanges scene, with Wall Street seen at the mercy of the Fed’s moves on rates, while forecasts of a recession are intensifying from many quarters.
Among several surveys, the latest one carried out by Bloomberg hints at a certain - cautious - optimism for equity traders: some of the world’s largest investors predict that shares will record double-digit gains in 2023, which would bring some hoped-for relief, after global markets suffered their worst loss since 2008.
Stocks 2023: possible upside, what to watch
In recent optimism that inflation has peaked and that the Federal Reserve may soon start to change its tune, 71% of respondents in a Bloomberg News poll expect stocks to rise, against 19% who expect a decline. For those who saw gains, the average response was a 10% return.
The informal survey of 134 fund managers incorporates the views of leading investors including BlackRock Inc., Goldman Sachs Asset Management and Amundi SA. It provides an overview of the big issues and hurdles to address in 2023 after inflation, war in Ukraine and aggressive central banks hit equity returns this year.
In reality, the stock market could be derailed again by stubbornly high inflation or a deep recession. These are top concerns for next year, cited by 48% and 45% of respondents, respectively. Equities could also hit new lows in early 2023, with many seeing skewed gains in the second half.
It should be noted that the energy crisis in Europe and signs of slower economic growth have so far kept the stock market subdued, even as China begins to ease some of its harsh anti-Covid brakes. Furthermore, there are growing fears that the slowdown already underway in many economies will eventually dent earnings.
Where to draw, then, for greater optimism about stocks?
Stocks 2023: the reasons for the increase, what to invest in?
“While we may face a recession and falling profits, we have already priced in some of it in 2022”, said Pia Haak, chief investment officer at Swedbank Robur, Sweden’s largest fund manager. “We will have better visibility in 2023 and hopefully this will help the markets.”
Hideyuki Ishiguro, senior strategist at Nomura Asset Management, predicts that 2023 will be “the exact opposite of this year”.
When it comes to specific industries, respondents generally prefer companies that can defend earnings during an economic downturn. Dividend-paying and insurance, healthcare, and low-volatility stocks were among their picks, while some favored banks and emerging markets including India, Indonesia, and Vietnam.
After getting hammered this year by rising interest rates, US tech stocks may also be gaining again, according to the survey. More than half of respondents said they would selectively buy the sector. Apple, Amazon, Google could be winners.
Some are optimistic about China, especially as it moves away from the Zero-Covid strategy. Evgenia Molotova, senior investment manager at Pictet Asset Management, said she would be a selective buyer of Chinese equities at current levels, preferring the dragon’s industrials, insurance and healthcare.
The economic events to monitor in 2023
For fund managers, better news on inflation and growth could be the catalysts for better performance. Nearly 70% of respondents said these will be the top potential positives. They also cited a full reopening of China and a ceasefire in Ukraine as drivers of the upside.
The emphasis on inflation and growth as the drivers is also in line with the latest survey of Bank of America Corp. fund managers. It showed that recession expectations were at their highest since April 2020, while a stagflation scenario, i.e. low growth and high inflation was the most feared.
Such concerns seem justified. According to Bloomberg Economics, the global economy is heading for its weakest performance in years, excluding the financial crisis and bouts of Covid. The IMF said last month that the situation is rapidly worsening.
The outlook going forward will be influenced by the likelihood, depth and longevity of the recession, said Fabiana Fedeli, chief investment officer for equities, multi-asset and sustainability at M&G. There are still pockets of opportunity where companies with strong fundamentals that can weather the storm are sold off in times of market panic.
Towards the end of the year, the direction of the market will depend on two key events coming next week: inflation data in the US on Tuesday and the Fed’s policy decision the day after. Some good news has emerged here: Price hikes have started to cool off after hitting a four-decade high, and the central bank has signaled that it may slow the pace of rate hikes.
“A sustained rally in risky assets is not likely until inflation is more firmly on the downside towards target”, said Shoqat Bunglawala, head of multi-asset solutions, EMEA and Asia Pacific at Goldman Sachs Asset Management.
Ben Powell, chief investment strategist for APAC at the BlackRock Investment Institute, is also cautious, saying stocks aren’t yet reflecting the full impact of tighter monetary policy.
Original article published on Money.it Italy 2022-12-09 12:51:41. Original title: Azioni: il 2023 può essere vincente, le previsioni
