2023 Annual Outlook: A Tale of Two Halves

February 28, 2023

Investment industry analysts and experts are debating whether a recession will occur in 2023. If you polled a long list, the response would be split. It’s hard to remember a time when expectations were this divided.

This uncertain outlook raises a couple of questions. Does Matco see a recession taking place in 2023? And does it matter to investors if a recession happens or not?

Our Outlook in Brief:

  • Matco expects that a recession is more likely to occur in 2024. The first half of the year will likely see central banks continuing to increase interest rates, the labour market producing healthy job growth, and corporate profits surprising analysts by remaining positive, all while inflation trends lower.
  • Understanding geopolitics is more important than ever for professional investors. The ripple effects of far-away conflicts will no longer be meaningless to the West. Economic growth will be de-synchronized in the future, meaning growth will be more regional-based than global. In the 1980s, economic growth was uneven worldwide, and certain countries were growing while others were in a recession.
  • Investors awoke to the fact that the world needs more traditional energy supplies, not less. Energy security and independence concerns are now top of mind for most Western governments. Despite the rally in energy shares over the last two years, the sector still has several positive catalysts.
  • Fixed Income, or more simply put, the bond market, has often been a haven for investors. The asset class is intended to provide investors with stability and income. For some, it serves as a source of retirement income. For others, it has smoothed its equity returns over the long term due to its typical characteristic of being less volatile.
  • Equity investors know that volatility isn’t new, that financial markets move up and down, and that this movement is expected. Over 2022, bond investors were also reminded that fixed-income securities are highly sensitive to interest rates. We believe that a well-defined investment process to select securities and deploy capital allows investors to navigate market uncertainty. By incorporating factors contributing to a margin of safety, we believe we are in a solid position to remain convicted in our investments and successfully navigate 2023 and beyond.

Learn more about our views on the global economy and how we are positioning ourselves for the next year.

2023 Annual Outlook – Download PDF

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