Mackenzie Investments expects economies around the world to slow in 2023, shifting the risks that investors will face in the year to come. According to the firm’s 2023 Outlook: The Blue Book, higher interest rates will remain in place for longer and the turmoil dominating financial markets in 2022 will abate in 2023.
“It’s clear that inflationary pressures will be sticking around. As a result, central bankers have been forced to increase rates rapidly, sending both stock and bond prices lower and leaving very few places for investors to hide in 2022,” says Mackenzie Investments chief investment officer of fixed income and multi-asset, Steven Locke.
“Heading into 2023, we anticipate more volatility due to tighter monetary policy, geopolitical risks and slower economic growth. However, we are hopeful the worst is behind us in the bond market and that there will be a broad-based recovery in equities towards the end of the year.”
Themes highlighted in the report include interest rate hikes – the largest in decades – the impact of higher borrowing costs, geopolitical risks (unlikely to blow over, the firm states), and recommendations that investors take a more defensive position in equities, favouring dividend-paying companies and higher quality businesses that exhibit lower volatility.
The report, Adjusting to life after Goldilocks, further adds that the firm expects interest rates to remain higher for longer than previously expected, central bank actions will slow economic growth and weaker economies will be a headwind for earnings.
The report further discusses higher household debt, demand and monetary policy, and examines every asset class, including Canadian, U.S., European, Asian and Chinese equities, emerging market equities, global fixed income, credit, currencies and commodities. In looking at asset class recommendations, the firm says it is overweight in Canadian, international, and emerging market equities, underweight in U.S. equities, neutral on sovereign and high yield bonds, and overweight on investment grade bonds.
