Wealth Outlook 2023
Roadmap to recovery: Portfolios to anticipate opportunities
We expect 2023 to be a year of challenges but also of change. After 2022’s aggressive monetary tightening, we see a shallow recession in the US and worse in some other places, like the Eurozone. The painful market selloffs we saw in 2022 anticipated these conditions. Remember, historically equities have never begun recovering before a recession has even started.
During 2023, however, investors’ focus will shift to potential recovery in 2024. By understanding what is likely for the global economy and asset classes in the coming year, we can see a roadmap for investing.
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CIO Perspectives ꟾ Week of March 20th, 2023
Silicon Valley Bank
Welcome back to CIO Perspectives. This week, Head of Investment Strategy APAC, Ken Peng talks about the implications for markets and your portfolio from the recent saga of a failed US bank.
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CIO Strategy Bulletin ꟾ Week of March 20th, 2023 By Citi Wealth Insights
Unintended Consequences
In our view, the US banking system will stabilize when the US government provides clear and unambiguous support for the system as a whole. The longer it takes for the government to provide clear guidance in support of depositors and the wider banking system, the less safe many depositors will feel. While we do not view Silicon Valley Bank’s failure as a systemic event, its untimely failure is indicative of the unique set of stresses embedded in financial markets at this time.
A silver lining amidst the present banking uncertainties is that we are likely in the final stretches of the bear market. Asset markets are now more likely to quickly price the economic weakness to come with the Fed recognizing this as well. Just as asset prices fell in 2022 when economic growth and profits rose, history suggests markets can find a bottom in the trough of an economic contraction.
Global Strategy ꟾ Quadrant March 2023
Still Wintertime for Profit, Not Spring
For equities markets, falling profits are an inconvenient truth. S&P 500 EPS fell at a 14% annualized rate in 2H 2022, and we expect declines to persist near that pace through 1H 2023. A bottom in equities markets should come this year in anticipation of economic growth in 2024. However, downward EPS revisions could be a challenge through midyear.
We still believe the worst of the bear market losses were felt in 2022, but we stay defensively positioned. Some investors see either a swift return or continuation of strong economic growth and low inflation despite a rapid US monetary tightening cycle with many other central banks following suit.
WORLD INVESTMENT NAVIGATOR – January 2023
- Signs of US Economic Contraction are Accumulating, and Sooner Than Expected
- The Fed Has Panicked Over Inflation even While Its Preferred Measure Never Rose More than 5.4% Y/Y (vs 9.1% for the CPI). It Won’t Decelerate as Fast
- China: Early End to COVID-Zero, Early Start to Economic Recovery
- Gold has Risen On Surging Inflation and Negative Real Yields. What Happens to It if Real Yields Rise to 1% on Slowing Inflation?
- Comparing proposals: Park in Treasuries or add some non-US equity risk?
- IG corporate bond yields offering significant positive real yield relative to expected inflation, while IG BBB spreads are near their average
- The Yen’s Comeback
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