After a turbulent and volatile year marked by rising inflation and interest rates (see our 2022 Year in Review), 2023 is shaping up to be another interesting ride as investors, businesses and consumers brace for the full effects of recent fiscal policy measures.
Months of economic slowdowns are likely to give way to a recession before the end of the year, says Wayne Wachell, Genus’ Executive Chair Person and Co-Chief Investment Officer. “All the signs are there,” he says. “The question is just how deep it will be.”
But there is good news, too. Here’s what to plan for – and even look forward to – in 2023.
A Leveling Off of Inflation
Every bear market follows a similar trajectory, and this one is no different. What started in 2022 with rising interest rates and falling stock and bond values will begin to affect the broader economy in 2023 as borrowing becomes more costly and consumer spending decreases. “The market leads the real economy by about nine months,” Wachell says.
And that means a likely recession is on the horizon. “The concern is that what happened in the ‘70s will happen now,” Wachell says. “The Fed wants to not repeat the mistakes of the ’70s and early ’80s, so it’s being very restrictive. But the bond market has been more optimistic about where inflation is going.”
The good news? Interest rate hikes are already helping to level off inflation.
A Return to Bond Yields
With interest rates rising, so too are bond yields, and that’s good news for investors. “We had a normalization of low interest rates,” Wachell says. “And we’ve left that now.”
If bonds are part of your investment strategy, then 2023 might be your year. “If you buy a bond now, you’ll get a good return, and that includes half of our client portfolios,” Wachell says. “The adjustment process to higher interest rates may be painful, but longer term it’s a good thing for our clients.”
Impact Investing Opportunities with a Gendered Lens
Another exciting trend for 2023 is the focus on impact investments powering companies that are working to advance gender equality. “We’re getting good data on gender equality within companies,” says Mike Thiessen, Chief Sustainability Officer and Co-Chief Investment Officer at Genus. “We can now test out strategies that implement gender equality data and screens.”
Thiessen adds that opportunities are also opening up for gender-focused impact investors thanks to government funding and additional investment funds with a gendered lens.
Look for the Silver Linings
Every downturn has its silver linings, and we can look forward to signs of economic recovery near the end of the year. “There will be opportunities for investors,” says Wachell. “Our job is to stay on our toes and be ready to move very quickly.”
Join us on January 26 in person or via livestream for an in-depth year in review and outlook on 2023.