Macquarie Asset Management, a part of Australia's Macquarie Group Ltd., in its "Outlook 2023" report, has forecast a US recession in the first half of 2023, following a slowdown in Europe, and "synchronised recovery" later in the year.
The report provides perspectives on various themes that could influence the investment landscape and performance of key asset classes in 2023.
Though the global supply chain pressure and demand may drop, inflation will probably remain above the US Federal Reserve's 2 per cent target. Still, it said that synchronised recovery in the developed world is possible later in the year.
Energy security will continue to be the dominant topic of discussion in 2023. It noted that LNG imports and reliance on other fuel sources could be a significant challenge for Europe next year, although it has enough resources to pull through the winter.
The asset manager also expects the transition to a low-carbon energy system to accelerate, given the ongoing stress in the global energy markets.
In a press release, commenting on the finding, Ben Way, group head of Macquarie Asset Management, said that global inflation, the end of easy monetary policy, supply chain disruptions, and war, among other things, drove Europe to prioritise energy supply over energy transition. "These events set global markets on a downward path—and the challenges they presented persist as we enter 2023."
He added, "When volatility and uncertainty abound, and where the cost of capital is not zero, it is especially important to be an active investor."
Despite diverse and complex global economic challenges, he said Macquarie would provide growth opportunities to clients.
Macquarie 2023 Outlook
Equity markets: Global equity markets may further decline due to recessionary pressure in the developed economies. However, it sees growth opportunities in sectors such as construction and engineering, consumer discretionary, etc.
Debt markets: Debt markets may continue to flourish in 2023. It said that high bond yields offer attractive valuations and strong protection levels for investors in investment grade, high-yield markets, and developed world sovereigns. But a defensive position is required because of a possible recession and high inflation.
Real assets: The infrastructure space has been a favourite among some institutional investors in 2022 due to the “defensive and inflation-linked nature of its cash flows”. However, the volatile macroeconomic environment in 2023 would also continue to draw investors towards “equity investments that are defensive and have high yields”.
