IG Wealth Management’s chief investment strategist, Philip Petursson is more optimistic about both equity and fixed income markets going forward, saying the firm is confident that both will soon come out of their troughs. The probability of an economic recession in Canada and the United States is also likely, he says in the firm’s most recent report, 2023 Outlook: Navigating the peaks and troughs, but adds that the firm expects to see peaks in inflation, interest rates and in economic activity in the coming year.
IG Wealth Management adds that opportunities could arise as equity and fixed income market outlooks become more certain. “The force and impact of a possible recession may prove to be shorter and milder than historical averages,” Petursson says. “Peak inflation, interest rates and asset correlation, with equity prices hitting their lows, will present opportunities to investors.”
They continue, saying equity valuations may be near a trough and current labour market conditions could keep economic contraction more muted in North America.
With some recession fears already priced into the market, they add that there may be less downside for equity markets in 2023 than what investors experienced in 2022. In fixed income, meanwhile, “IG holds an improved view on the fixed income market, as evidence of lower forward inflation may reduce the risk to interest rates and bond yields, increasing the potential for higher returns.”
They conclude, saying 2023 will be about resolving uncertainties. “We feel that much of the recession has already been factored into equity and bond market valuations and that investors will be rewarded with an improved market environment.”
