Outlook 2023: Gregor M.A. Hirt (Allianz Global Investors)

Outlook 2023: Gregor M.A. Hirt (Allianz Global Investors)

11 januari 2023

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Gregor Hirt (photo archive Allianz Global Investors)

By Gregor M. A. Hirt, Global CIO Multi Asset at Allianz Global Investors

What is the economic outlook for 2023?

‘In 2023, investors will want to watch the likelihood of recession, the path of inflation and the potential for further interest rate rises. While it is likely to continue to be a tough-to-navigate environment, opportunities to re-enter markets could start to appear as the bad news peaks.

We expect the United States to fall into recession in 2023 as higher financing costs and the fall in real disposable incomes due to higher inflation put pressure on the economy. Europe may enter a longer-lasting recession earlier, given its strong dependency on imported oil and gas, which have risen sharply in price. China is suffering from structural issues in its housing market and the implications of its Zero-COVID policy.

And we do not expect a let-up in monetary tightening – we think markets still underestimate where rates may end up.

On the plus side, we are likely to see a decline in year-on-year inflation rates as 2023 unfolds due in part to base effects as energy prices start to ease, even if underlying inflationary pressures may remain. For investors seeking re-entry points, government bonds, particularly US Treasuries, could offer the first opportunities for those seeking longer-term expected returns. In equity markets, the first half of a recession has historically tended to be when prices begin to bottom out.

Overall, the current rising volatility could be an ideal environment for active investors to identify opportunities in a year that could be a major inflection point for markets.’

 

We do not expect a let-up in monetary tightening.

 

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