By: Graham Wainer
The economic cycle has been highly disrupted over the past three years — several different investing environments have varying likelihoods of playing out over the next 12-24 months. A robust investment strategy must cater for more than one outcome.
US recession is widely expected — we believe a soft landing, characterised by growth slowing but avoiding a 'broad-based weakening', is fairly likely, yet under-appreciated. In addition, the longer term US growth picture is increasingly supported by new structural drivers.
The intention to end zero-covid policy in China is a positive development, yet highly uncertain — this justifies a meaningful valuation discount for Chinese markets, which is unlikely to dissipate in the short term.
European and UK recessions are likely in 2023 — equity valuations are cheap, however, the challenges remain formidable with the potential for negative surprises. It is too early to emphasise European assets.
Multi-asset portfolios need to remain flexible, diversified and robust — we have added to conventional bonds at higher yields, emphasise earnings resilience and value in equity portfolios, and consider physical gold to offer key diversifying properties for 2023.
We are more optimistic than most, particularly for the US, where the majority of equity capital is deployed. Across the portfolio we aim to be different from the broad market index, emphasising specific areas of strength and opportunity.
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In addition to the information provided by SFIM, you may wish to consult an independent professional.Download 'Annual Investment Letter JAN 2023'