Countdown 2023, a look into the crystal ball: PART 2 - Janus Henderson.
At the end of the year, economists, investment strategists and asset managers look ahead. These days they publish their forecasts and strategies for the new year.
Private wealth attends the most interesting conferences and publishes the most exciting thoughts of the professionals to offer you, dear readers, inspiration and guidance for a (hopefully) successful investment year 2023.
Note: Despite careful selection of sources, no liability can be accepted for the accuracy of the content. The information provided in private wealth is for informational purposes and is not an invitation to buy or sell securities.
PART 2: Janus Henderson - The investment zeitgeist is changing.
In 2022, says Paul O' Connor, Head of Multi Asset at investment firm Janus Henderson, interest rate movements were the dominant factor in the capital markets. "Most of that story is now behind us. Central bank policy rates will peak in the spring. Monetary policy is then likely to hit the pause button and first observe how the interest rate hikes work. So interest rate risks are receding, growth risks are moving forward. Next year, investors will focus on the economy and corporate profitability."
Negative surprises are to be expected then, especially in corporate earnings. "Normally, earnings decline by around 20 per cent in a recession. Currently, analysts still expect increases in 2023. There is a lot of correction work to be done. Downward earnings revisions will be the story of the first half of the year," O' Connor analyses.
"I therefore expect share price setbacks in the first two quarters of next year. But for equity investors, that will probably be the last chance to get on board. After that, a strong bull market will begin that will last for years," says John Bennett, who is responsible for European equities at Janus Henderson: "My motto for 2023 is 'buy the last profit warning'. That will probably come in Q2. Investors should take advantage of it. Because such opportunities don't come often in an investment career."
However, not all sectors will do well in the longer term. "You have to be selective. Because in the stock market, the investment zeitgeist has really changed," Bennett is convinced: "2022 was a great year for macro experts. 2023 will be the year of the stock picker." What matters, he says, is which companies will prosper in a world of slower growth and persistent inflation. "Rates of price increases are coming down and inflation is calming down," Bennett analyses, "but it's not going away because labour is going to get a bigger share of the value-added pie in the future. The world has become more socialist. That's inflationary."
But higher rates of inflation in the long run have implications for more than just corporate profitability. "The price of money, the interest rate, has also now changed permanently. Investors must therefore be careful not to pay too much for shares. Valuation will again be critical to investment success in the future," says Bennett.
In this environment, highly valued growth stocks would continue to suffer. "Over the next decade they will underperform as an asset class," John Bennett is convinced and concludes, "I say: 'Good night Nasdaq, hello rest of the world. Good night tech and growth, hello value and energy'."