Even with recession looming, 2023 will be a better year for investors

The force and speed of monetary tightening may have been a shock but with the conditions for inflation easing, we are close to a peak in the interest rate cycle

As yields rise, the outlook for bonds will improve, while the peak in rates will also be good news for the equity market

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Shoppers on New York’s 5th Avenue on Black Friday. Although recession is expected in the first half of 2023 in the US, a better year is ahead for investors, with opportunities for income-focused investing. Photo: Bloomberg

Chris Iggo

Chris Iggo is chair of AXA Investment Managers Investment Institute and chief investment officer of AXA IM Core.

Published: 10:00pm, 30 Nov 2022Updated: 10:50pm, 30 Nov 2022

It’s been a challenging year. Across major equity and bond markets, total returns have been negative for much of 2022. It is only in the fourth quarter that they have picked up. Even now, many are sceptical of the rally, given that potential bad news is still to come on inflation, interest rates, economic growth and global politics.

Investor confidence is fragile, and the news is not encouraging. So, what should we expect in 2023?

Across listed bond and equity markets, it is difficult to find any index that is up this year. Most have recorded heavy losses. The biggest losses have been in those asset classes most sensitive to changes in interest rates.

These so-called “long-duration” investments include long-dated bonds and those parts of the global equity market that rely on the promise of stable long-term earnings growth. Assets like long-term US Treasuries and the Nasdaq equity index have suffered more than most.