The primary objective for investors is to review their portfolios and align them with long-term strategic allocation recommendations.
Minneapolis, December 6, 2022 /PRNewswire/ – U.S. recession could arrive in mid-2023 based on past economic data and waning consumer credit power, RBC Wealth Management suggests in it Global Insights 2023 Outlookwas released on Tuesday.
An inverted U.S. Treasury yield curve, combined with the advent of “tight money” and inflation below real incomes compared to a year ago, suggests that a recession and associated global equity bear market may be on the horizon. shows further. The primary objective for investors is to review their portfolios and align them with long-term strategic allocation recommendations.
History shows the market to recover well before the recession is over. Usually about 3-5 months in advance.
“Recessions are painful, but relatively short from a long-term investment perspective,” he said. Kelly BogdanovaVice President and Portfolio Analyst, RBC Wealth Management – United States
US stock market rally could set foot in 2023
Even if the economy slips into recession next year, the stock market is likely to start a new bull market cycle before the recession ends, as past guides say, the report says.
Easing inflation data, negative investor sentiment near its October lows, and the fact that the S&P 500 has almost always delivered strong positive returns in the months following the US midterm elections are likely to continue in the coming weeks and months. It could mean that the stock price rises over the month.
Investors expect the stock market to continue to rise through 2023, before giving way to another period of stock market declines before rising again later in the year.
“Despite the expected lingering economic difficulties, the stock market has already absorbed significant blows, including one of the Fed’s fastest and largest tightening cycles in history,” Bogdanova said. Back-to-back negative returns are rare, and the outlook for corporate earnings is not as bad as during previous periods of economic stress.”
Looking ahead to 2023, investors should consider focusing on quality, sustainable dividends and moving away from individual company risks. The small- and mid-cap segment is attractive, according to the report, due to discounted valuations and the potential to profit once the economic sprouts begin to emerge.
Within the large-cap S&P 500, analysts continue to favor the energy sector next year. The tight supply of energy commodities will persist, supporting prices and earnings to a greater extent than during a typical economic downturn.
US Fixed Income: Focus on Financial Stability
Over the past two years, the Fed has focused on improving employment rates in the labor market and stabilizing pricing in the economy. The next action is to focus on financial stability in 2023.
Historically aggressive tightening campaigns are likely to require a much more cautious approach by policy makers, especially against domestic and global financial vulnerabilities that may result from higher interest rates due to a stronger dollar. need to raise the interest of
“This means the Fed will soon put the blunt tool of rate hikes back into its toolbox and adopt more surgical and macroprudential measures that will help ensure the health and liquidity of the financial system. It has potential,” he said. Tom GarretsonRBC Wealth Management – Senior Portfolio Strategist, US Fixed Income
Interest rates could peak in early 2023, following the expected 50 basis point rate hike at the Federal Reserve’s December meeting. This could be the last of a series of sharp rate hikes, and even a gradual decline in interest rates into the second half of 2023 to mitigate the expected mid-year slowdown.
Yields across the fixed income industry are expected to fall in 2023. Based on RBC Capital Markets forecasts, his 10-year Treasury yield in the benchmark could drop below 3.5% by the end of the year from his near 4.0% level today.
Opportunities are open for fixed income investors to put money in, but they may end sooner than expected. If yields continue to fall through his 2023, reinvestment risk in short-term bonds could rise. Analysts continue to favor strategies to secure historically high yields in medium- and long-term bonds.
of Global Insights 2023 Outlook It also shows RBC Wealth Management’s house position in the regional equity and fixed income markets. Views of them can be found here.
About RBC
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About RBC Wealth Management – United States
of usa, RBC Wealth Management, operates as a division of RBC Capital Markets LLC. Founded in 1909, his RBC Wealth Management is a member of the New York Stock Exchange, the Financial Industry Regulatory Authority, the Securities Investor Protection Corporation, and other major stock exchanges. RBC Wealth Management $489 billion Total client assets with over 2,100 financial advisors in 186 locations in 42 states.
Source RBC Wealth Management – USA
