2023 could bring some light to investors after the storm

Outlook 2023
December 2022 | 3 min read   

2023 could bring some light to investors after the storm 

The tail end of the Covid-19 pandemic, geopolitical tensions, high inflation and a global energy crisis have contributed to make 2022 a momentous year. As the year draws to a close and look ahead at 2023, we believe that some light is in sight for investors after a long and lasting storm.

At Amundi, we believe that 2023 will be a two-speed year characterised by the coexistence of opportunities for investors in areas like fixed income and attractive market valuations with several risks, such as an excessive Fed tightening and economic recessions in Europe and China.

Looking ahead, we believe that the ongoing Russia-Ukraine conflict will be a catalyst of the regime shift, leading to higher geopolitical uncertainty and a diversification of economic divergences. Europe will likely suffer a recession due to the energy crisis, and Governments of the EU will likely focus on a new strategic energy independence, diversifying sources and forging new commercial ties with other partners.

China could deliver positive surprises next year, as we believe that a stabilisation of the housing market is underway and Covid-19 restrictive policies could be gradually relaxed, but geopolitical pressure and an intensifying confrontation between US and China will be the key risks.

In terms of fiscal policy, we think that Central Banks will continue tightening their monetary policies, albeit at a slower pace than this year. Financial markets have now priced in the majority of future hikes, and most will depend on the terminal rate that will be reached by the Fed: if it will be close to 6%, a recession may be more likely in the US and could be harsher than expected.
We believe that markets valuations are now more appealing after the great repricing, as markets will start pricing in a Fed pivot between the first two quarters of 2023. Bonds are back under the spotlight and will likely be a theme for investors, with a focus on high-quality credit, active duration stance and currency management.

Furthermore, in our opinion, equities might also provide entry points during the year. Following a cautious approach, US stocks should be favoured with a quality/value/high dividend tilt, considering also a possible addition of Europe and China stocks and also cyclical and deep-value ones to play the rebound. Divergences among Emerging Markets will intensify and selection will be crucial and countries with better inflation and monetary outlooks should be preferred.

ESG themes such as energy transition, food security and the shift towards net zero could provide interesting opportunities, and companies that have room for improvement in their ESG journey might offer good prospects going ahead.
Lastly, we expect a revival of the 60-40 portfolio allocation, and due to recession risks, the diversification engine provided by bonds should work again. Persistent high inflation could call for a greater allocation towards real assets and sectors more resilient to this phenomenon.

Read more about Amundi’s 2023 Outlook

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Important Information

Unless otherwise stated, all information contained in this document is from Amundi Asset Management S.A.S. and is as of 1 December 2022. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi Asset Management S.A.S. and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. All investors should seek professional advice prior to any investment decision, in order to determine the risks associated with the investment and its suitability. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results.

Date of first use: 2 December 2022
Doc ID: 2618744

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