‘I’m optimistic because everyone is bearish’: Investment managers see gains possible in 2023 despite recession fears

By Steve Gelsi

Investment managers are banking on strengths despite rising recession expectations

The year ahead for investing could be better than many are expecting for stocks, although a recession looks likely, pros at Natixis Investment Management said on Wednesday.

Even if storm clouds form and Wall Street dumps stocks in 2022, money managers still see some strength in fixed income and other areas of financial markets like energy, healthcare, and financials.

Managers are less bullish on real estate, industrials and consumer discretionary assets.

“I’m bullish because everyone is bearish,” said Jack Janasiewicz, portfolio manager and principal portfolio strategist at Natixis Investment Management Solutions. “The downside is already reflected in the market.”

The stock market has reacted negatively to a series of shocks since 2020, beginning with the COVID-19 lockdown, supply chain issues, the invasion of Ukraine, and rapid interest rate hikes by central banks around the world.

While the labor market will weaken in the coming year, Janasiewicz said he does not see a prolonged period of inflation and slow growth in the spirit of stagflation in the 1970s. He remained overweight investment grade bonds through 2023. Volatility is likely to continue until the Fed reaches its terminal rate or peak rates, which is likely to happen in mid-2023.

See also: MARKETWATCH LIVE COVERAGE

Amber Fairbanks, portfolio manager at Mirova US, said she’s a “soft bull” for 2023 with a focus on sustainable energy. She sees less enthusiasm for “story stocks” with interesting business plans and red ink, and a return to an emphasis on profits and basic business fundamentals.

Michael Nicolas, partner and portfolio manager at Harris Associates/Oakmark Funds, said that two years after the 12 recessions in the United States since 1945, stocks are typically up about 20%.

Stocks like Alphabet Inc. (GOOGL) and Netflix Inc. (NFLX) are relatively attractive at current levels, according to Nichols, along with stocks from the financial sector including Bank of America Corp. (BAC) and Wells Fargo & Co. (WFC). .

“Banks are well positioned to weather the downturn,” he said.

Separately, Natixis said a survey of 500 institutional investors managing $20.1 trillion in 29 countries found that 85% believe the economy is or will be in recession in 2023.

Fifty-three percent of institutional investors said they actively de-risk their portfolio, with a focus on high quality fixed income securities.

As supply chain constraints eased year-on-year, 57% said war was the top threat to the economy.

74 percent of institutions agree markets will favor active managers, “especially as the majority say their active investments have outperformed in 2022,” said Liana Magner, executive vice president and head of retirement and institutional investing at Natixis Investment management in the United States

Most believe inflation will remain high and that central bank policy alone will not be able to fix it, while almost half agree an artificial soft landing is unrealistic.

-Steve Gelsi

(ENDS) Dow Jones Newswires

10/12/22 1404ET

Copyright (c) 2022 Dow Jones & Company, Inc.