Friday Highlight  

Three pockets of opportunity for 2023

Three pockets of opportunity for 2023
The UK saw high turnover of prime ministers in 2022. (PA Wire/PA Images via Fotoware)

A new regime requires a new playbook.

Last year ushered in higher levels of inflation, an end to ‘easy money’ policies and a flat-to-negative growth environment, marking a total break from what investors have experienced since the financial crisis.

Meanwhile, markets were buffeted by a series of unforeseen events, including the Russian invasion of Ukraine and the rapid succession of British prime ministers.

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Rather than patiently waiting for the macroeconomic headwinds to pass, investors need to adapt.

The answer to this lies in sourcing returns at a more granular level. Gains will still be possible, but not across the board.

Instead, investors will have to zero in on specific countries, sectors, themes and asset classes that exhibit resilient characteristics and benefit from tailwinds in the current environment. 

Below, we outline three areas we have identified as promising.

High-quality heroes

One of the areas for 2023 we are interested in as a result of events in 2022 is the bond market – especially the high-quality corporate bond market.

This area offers compelling discounts and is one we want to leverage in our client portfolios this year.

Elsewhere in fixed income, emerging market debt fared comparatively well in 2022, and this could be a powerful play if the market recovers.

Strong tailwinds include a weakening dollar, the prospect of slowing inflation, and China’s reopening.

From an equity perspective, we see opportunities in securities that offer an attractive level of income.

We expect dividend-paying stocks to fare better, alongside parts of the market that are less sensitive to interest rate rises, such as healthcare and consumer staples.

Our overarching focus remains on quality investments with resilient margins – and at reasonable valuations. 

Silver lining

One pocket of the market that felt the strain in 2022 was precious metals.

While gold and silver started off the year strongly, they soon came under significant pressure as the dollar rallied.

With the dollar starting to come off its highs, we are beginning to see positivity come through for the precious metals market. 

Adding to this, we believe there will be a larger focus on green energy infrastructure, for which silver is an important component.

While there has been a pick-up in demand for the metal as a result of this, we have not yet seen a pick-up in supply.

To us, this spells a positive market for silver in 2023 – and we are positioning our portfolios to capture this trend.

We are doing this through both traditional silver bullion exchange-traded commodities, as well as active funds that are buying stocks of gold and silver miners to tap into the equity component.