Citi Global Wealth Investments (CGWI) released its Wealth Outlook 2023 report; Roadmap to Recovery: Portfolios to Anticipate Opportunities. Published twice yearly, Outlook provides insights into the global economy and financial markets for the year ahead and beyond.
The latest edition’s title reflects the investing journey that Citi Global Wealth Investments (CGWI) envisions and the steps that investors should consider diversifying their portfolios.
What were the findings of CGWI’s survey?
In 2023, CGWI predicts the weakest annual global economic growth in forty years outside of the Global Financial Crisis and the COVID shutdowns. The year ahead is likely to see:
- A shallow US recession and worse in some other places such as the Eurozone
- A recovery in Chinese growth, by contrast, as pandemic restrictions are relaxed
- US inflation continuing to ease, ending 2023 at around 3.5%
- The US Federal Reserve to start cutting interest rates by the second half of the year
- A 10% drop in global earnings per share
Just as 2022’s turmoil reflected these forecast conditions for the year ahead, investors will likely start to focus on 2024’s recovery in 2023. With the equity bear market incomplete, CGWI enters the year positioned defensively, but expects to pivot as the year goes on.
CGWI sees a likely sequence of potential opportunities, including:
- Short-term US investment grade fixed income amid today’s higher interest rate environment
- Defensive equities such as resilient dividend payers as the bear market continues for now
- Non-cyclical growth equities to bottom before cyclicals once the Fed pivots to cutting rates
- A subsequent entry point into more cyclical equities
- “Deep value” in select non-US assets and currencies once the US dollar peaks
- Certain alternative strategies to position for distressed and other opportunities following the recession
What do the findings mean for the industry?
“The sharp declines across many asset classes in 2022 has left long-term valuations more attractive. For the first time in several years, we see genuine portfolio value in fixed income. Short duration US Treasuries present a compelling alternative to holding cash,” said Steven Wieting, Chief Investment Strategist and Chief Economist at Citi Global Wealth Investments.
“Over time, the US stock market has never bottomed before an associated recession has even begun, so we regard recent equity upside as a bear market rally,” commented David Bailin, Chief Investment Officer and Head of Citi Global Wealth Investments.
“A year like 2022 can make holding excess cash seem tempting, but the clear lesson of history is that this almost always leads to missing opportunities when markets begin to recover. For 2023, we reiterate the fundamental wisdom of keeping portfolios fully invested, anticipating the opportunities that we expect,” David Bailin further commented.
CGWI also updated its case for “unstoppable trends,” the multi-year phenomena that reshapes business, everyday life, and portfolios. These include digitization, aging populations, the rivalry between the US and China and the transition to secure sources of energy. CGWI highlights ways to seek exposure to these transformational forces in portfolios. To access the full report, summary versions, short videos and other materials can be accessed here.