/R E P E A T -- IG Wealth Management 2023 Market Outlook: Possibility of Recession May Bring New Opportunities for Investors/ Français
- In 2023 expect to see peak interest rates and inflation
- Strong labour markets may help mitigate an economic contraction
- Opportunities could arise as equity and fixed income market outlooks become more certain
WINNIPEG, MB, Jan. 9, 2023 /CNW/ - According to IG Wealth Management's ("IG") 2023 Market Outlook - Navigating the peaks and troughs, the year ahead will see peak inflation and a global economic slowdown heightened as interest rates work their way through the markets.
"Central bankers in 2022 have continued to signal that a slowing economy is necessary to fight inflation, but the force and impact of a possible recession may prove to be shorter, and milder, than historical averages," said Philip Petursson, Chief Investment Strategist, IG Wealth Management. "Peak inflation, interest rates and asset class correlation, with equity prices hitting their lows, will present opportunities to investors who are able to navigate the market environment."
In its 2023 economic outlook, IG Wealth Management expects the following investment themes to emerge in the year ahead:
Navigating the Peaks and Troughs of 2023
After several rate increases, the Bank of Canada and the U.S. Federal Reserve may be nearing a pause to allow rate hikes to work their way through the economy and bring inflation down. As we look ahead to 2023, equity valuations may be near a trough, with valuation gaps that may suggest improved relative performance for international equities, including emerging markets and Canada outperforming U.S. equities over the medium term. In fixed income, interest rates and bond yields are at levels not seen in over a decade, which should allow for an improved return profile over the next decade.
Will there be a "Recession in Name Only"?
With North America, Europe and Asia all experiencing recessionary conditions, including a slowdown in global manufacturing activity, IG believes that the risk of recession is global. However, the money supply growth rate – the primary "excess" condition contributing to inflation – has already fallen back to historical levels in the U.S., Canada and other regions around the world. Further, the strength of the current labour market could keep an economic contraction more muted in North America, pointing to a recession that may be more in name only.
Opportunities in Equity and Fixed Income Markets
As some recession fears have already been priced into the market, the IG Outlook predicts that there may be less downside for equity markets in 2023 than what investors experienced in 2022. In the event of an economic crisis, diversification opportunities could arise across asset classes after an initial impact on global markets, as correlations break down and economies start to change pace and move along their own economic cycles. IG holds an improved view on the fixed income market, as evidence of lower forward inflation may reduce the risk to interest rates and bond yields, increasing the potential for higher returns.
"As we navigate the peaks and troughs of 2023, the potential recession risks will not overshadow the fixed income and equity opportunities," concluded Mr. Petursson. "After three years of navigating unprecedented events in the markets, 2023 will be about resolving the uncertainties and investors will be rewarded with an improved market environment."
To learn more about IG Wealth Management's 2023 Market Outlook, visit https://www.ig.ca/en/insights/2023-outlook-navigating-the-peaks-and-troughs.
About IG Wealth Management
Founded in 1926, IG Wealth Management is a national leader in delivering personalized financial solutions to Canadians through a network of advisors located across Canada. In addition to an exclusive family of mutual funds and other investment vehicles, IG offers a wide range of other financial services. IG Wealth Management has $113.7 billion in assets under advisement as of November 30, 2022, and is a member of the IGM Financial Inc. (TSX: IGM) group of companies. IGM Financial is one of Canada's leading diversified wealth and asset management companies with approximately $257 billion in total assets under management and advisement as of November 30, 2022.
This commentary may contain forward-looking information which reflect our or third-party current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein. These risks, uncertainties and assumptions include, without limitation, general economic, political and market factors, interest and foreign exchange rates, the volatility of equity and capital markets, business competition, technological change, changes in government regulations, changes in tax laws, unexpected judicial or regulatory proceedings and catastrophic events. Please consider these and other factors carefully and not place undue reliance on forward-looking information. The forward-looking information contained herein is current only as of 11/30/2022. There should be no expectation that such information will in all circumstances be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise. This commentary is provided as a general source of information. It is not intended to provide investment advice or as an endorsement of any specific investment.
SOURCE IG Wealth Management
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