A moderate recession is likely, opportunities among fixed-income markets and relative caution in European equities
After a particularly turbulent year in 2022, Ostrum Asset Management’s (Ostrum AM) experts are expecting a moderate recession in 2023. However, investors may be able to capitalise on investment opportunities and attractive entry levels in the markets, particularly in fixed-income and credit. With the ongoing energy crisis in Europe, extreme caution is required in stock picking. Philippe Waechter, Chief Economist, Stéphane Déo, Head of Market Strategy, Alexandre Caminade, CIO Core Fixed Income & Liquid Alternatives, Philippe Berthelot, CIO Fixed Income and Frédéric Leguay, Head of Equity Investments, present their views on the economy and on which markets and investment strategies to prioritise in order to find value in 2023.
MACROECONOMY
High probability of a recession, but of low intensity
- A less dynamic cycle and high recession risk;
- Three key issues: demand drivers; monetary policies & inflation; the energy crisis in the eurozone.
ASSET ALLOCATION
Caution and diversification
- Anticipating greater interest rate stability and lower volatility;
- Une situation favourable for fixed-income and credit investments.
Asset Management - Finding value in 2023
FIXED INCOME - Attractive investment levels in 2023
- Interest for sovereign debt on one hand, for supranationals and agencies on the other hand to benefit from swap spreads;
- Opportunities among sustainable bonds, given the improvement in the green issue premium.
Asset Management - Finding value in 2023
CREDIT – Opportunities in investment grade and high yield
- Highest yield in 10 years in investment grade and high yield credit, in Europe and the US;
- Selectivity required, with a careful assessment of initial investment levels.
Asset Management - Finding value in 2023
EUROPEAN EQUITIES – Caution and selectivity in the face of volatility
- Limited short-term potential upside from current valuation levels;
- Prioritise visibility and valuation spreads within the same sector.
