Some of the world’s biggest investors predict that stocks will see double-digit gains next year, yet the path to a rebound will not be a straight line.— and that the US Federal Reserve could soon start to change its tone – 71 per cent of respondents in a Bloomberg survey expect equities to rise, versus 19 per cent forecasting declines.
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.
Those in favor note valuations are relatively cheap despite the recent rally and bond yields are expected to fall next year. Yet sentiment is shifting away from a broad “buy growth” approach as many participants suggest being very selective when going back into the segment, putting money only on those companies that have established business models and resilient financials even in an economic downturn.