Deutsche Bank Private Bank’s global chief investment officer Christian Nolting and Zeynep Ozturk, CIO of EMEA, discussed their investment outlook for 2023 this week, identifying key themes underpinning investment conditions in the new year.
Faced with soaring inflation and rising interest rates, this week
Bank Private Bank published its outlook ‘Resilience
versus Recession’, highlighting investment opportunities in
capital markets and fixed income, notably in Asian
Speaking at the media event, Nolting said: “Overall on the outlook for 2023, we are cautiously optimistic. We expect mild recessions in Europe and the US, but improving dynamics in Asia where supply chains are all but resolved.”
“As rates stabilise and inflation abates, there should be
opportunity for equities and fixed income, while alternatives
like real estate and private equity offer potential risk premia,”
Technology is key to upping productivity growth to enhance economies’ sustainable growth potential, the bank added.
China’s economy is expected to pick up pace in 2023 with greater political clarity and more market-relevant initiatives, the bank continued. Regional reopening continues with global production chains normalizing. Chinese equities could be a major value trade while Indian equities may offer tech opportunities, the bank said in a statement.
Price rises will moderate due to an easing of commodity prices, but inflation will remain a problem in 2023. There will also be upside risks from complacent central banks, expansionary fiscal policy, wage demands and effects of income redistribution, the bank said.
The dollar dominance is poised to fade, with the aggressive US hiking cycle sufficiently priced in. The euro may stabilize given the persistent eurozone inflation, relative to the US, and currency wars are unlikely as commodity import price concerns dissuade competitive devaluations, the bank continued.
The bank also expects gold to be a better bet in 2023, saying that it is a natural hedge.
Meanwhile, the 2022 sell-off in bonds will open up fresh yield opportunities in 2023 against a medium-high but managed inflation background. Most yields are already up to 1998 to 2014 average levels, whilst yield and quality are not a contradiction anymore with fundamentals remaining solid, the bank said.
Alternatives may also provide risk premia and an active return (alpha) above overall market gains (beta). Real estate offers a potential inflation hedge. Overall, private equity and debt offer opportunities and challenges, but with potential diversification benefits, the bank said.
Meanwhile, the COP27 commitments complement major recent policy initiatives vis a vis the energy transition in the EU and US, the bank added, but the ideas and goals of developing economies need to be factored in too, with high priority being given to social needs.