Rotating the strike
Welcome to the January 2023 edition of our Quarterly Investment Report.
This report brings you key investment insights from our research partners and independent advisory board.
Summary of our latest insights
- Markets are off to a solid start in 2023, with softer inflation (ex-Aus), resilient economic data, and China’s reopening, driving hopes of the global economy avoiding a recession.
- Whether the global economy dips into a recession this year remains an open question. Many of the factors improving the outlook may prove to be temporary.
- There are increasing risks to unlisted asset valuations (valuation-lag), often evident after swift increases in interest rates.
- If 2022 taught us anything, it’s that markets in the short term are irrational and will often swing between being too pessimistic and too optimistic. Returns year-to-date reflect a reversal of overly pessimistic expectations coming into 2022.
- Despite the news headlines about layoffs at high-profile companies, labour conditions remain extremely tight. We are concerned about the impact of wage increases on inflation as workers demand more pay and spending shifts from goods to services.
- Let’s assume economic conditions continue to expand with low unemployment. In that case, central banks will likely keep rates higher for longer to avoid a resurgence of inflation, pushing out the timeframe for a sustainable rally in equities.
- We are taking some profits across equities after a solid start to the year, rotating the strike to fixed-interest assets that offer relatively attractive income yields with less risk.
- Missing the key inflection points is a growing risk in 2023, and the House View is to remain fully invested and rebalance portfolios around any price dislocations.
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