December 2022 | With CPI currently above 7%, and the US Federal Reserve moving aggressively to curtail it, a recession 2023 appears likely. To prepare their portfolios, investors may wish to balance exposure to quality value stocks with reasonably priced, high-quality growth stocks. This is because quality factors, which include return on equity, return on assets, net income margin and asset turnover, consistently outperformed in past earnings-driven bear markets.
01 | While peak inflation may be behind us, prior periods in which inflation has been over 5% have ended in recessions.
02 | S&P 500 earnings have always declined in recessions. Consensus 2023 earnings estimates are above those of 2022, however, suggesting investors have not yet discounted a potential recession.
03 | During previous earnings declines, high quality factors have outperformed low quality ones. As a result, we believe investors may benefit in 2023 with a quality orientation in their equity portfolios.
Unless otherwise stated, all information contained in this document is from Amundi Asset Management US (Amundi US) and is as of December 2, 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 US 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. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results. Amundi Asset Management US is the US business of the Amundi Asset Management group of companies.