Top money managers expect global stocks to recover in ’23

Amid recent optimism that inflation has peaked —and that the Federal Reserve could soon start to change its tone—71% of respondents in a Bloomberg News survey expect equities to rise, versus 19% forecasting declines. 

The informal survey of 134 fund managers incorporates the views of major investors including BlackRock Inc., Goldman Sachs Asset Management and Amundi SA and was conducted between 29 November and 7 December. It provides an insight into the big themes and hurdles they expect to be grappling with in 2023 after inflation, the war in Ukraine and hawkish central banks battered equity returns this year.

Last year, a similar survey predicted that aggressive policy tightening by central banks would be the biggest threat to stocks in 2022.

Those who expect global shares to rise see an average 10% gain for 2023. That is in line with the average historical return of the MSCI All-Country World Index, yet looks modest given previous rebounds such as 2009 or 2019 where equities gained more than 30% and 20% respectively.

Investors remain cautious for the start of the year and predict that stock market gains will be skewed to the second half of 2023. When it comes to specific sectors, respondents generally favoured companies that can defend earnings through an economic downturn. Dividend payers and insurance, health care and low volatility stocks were among their picks.

The biggest threats to a potential recovery are somewhat interlinked, with stubbornly high inflation or a deep recession ranking high on investors’ watch list, cited by 48% and 45% of participants, respectively. 

Clues about the path forward might came as early as next week where a frenzy of headline risks are awaiting investors, including US consumer-price data for November as well as rate decisions and commentary from both the Federal Reserve and the European Central Bank. 

After being hammered this year as interest rates climbed, US technology stocks may also come back in favour, according to the survey. More than half of respondents said they’d buy the sector.