Interim Investment Update- February 2023


A Change in Mood Music?

As we move through Q1, it would appear that 2023 is poised to potentially reverse many of the trends that defined 2022. A number of factors have conspired to bring about this early mood change, namely:

  • Encouraging inflation news – clear downward trajectory
  • EU economic data suggesting recession risks are receding
  • Upward revisions to GDP growth forecasts
  • Improved but cautious outlook on interest rate expectations
  • China re-opening – A large contributor to global economic growth
  • Company earnings resilient across many sectors

As we alluded to in our 2023 Investment Outlook – it certainly could be the case that bond investors will have the wind at their backs over the coming year, given the likelihood of peaking policy rates in H1 and a new disinflationary trend which is already underway in many regions. We are starting to see that earnings for equities, whilst resilient, are still under pressure from the global economic slowdown, and we see this continuing in the same vein over the coming months. Despite this, investors have chosen to focus on more positive developments so far this year, such as the prospect of rapid disinflation leading to a pause in rate hikes, a stabilisation of the US dollar if not some further weakening this year, stronger than expected US and Eurozone fourth quarter GDP results, and the positive supply and demand consequences of the Chinese reopening.

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