It’s been a tricky year for 60/40 investors, even with the late bounce in stocks at the tail end of 2022, but Nathan Sweeney, deputy CIO of multi-asset at investment manager Marlborough, thinks next year will be better for investors.
“I’m a bit more optimistic than most,” Sweeney told Reuters in an interview earlier this month.
“The reality is, we’re expecting a recession, the most well-flagged recession in history, and as a result of that we have a market that wants to get ahead of it and take advantage of the reversal on the other side,” Sweeney added.
Sweeney thinks the bottom in equity markets could already be in, with big unknowns about the peak in interest rates now more visible than 12 months ago.
“What is now clear is we have an expectation of where peak interest rates are so it means the market can begin to price the impact of higher rates on company earnings,” Sweeney said.
“The expectation is we get around 5% in the U.S. and that enables investors to price in expectations for stocks in the future. That’s why you’re see that bottom coming in.”
At an underlying level, Sweeney says he would be looking for a “big bounce” in 60/40 portfolios in 2023, while also seeing opportunities in tech and small-caps.
“If you were to go back a year, everybody was trying to buy tech companies. Now you’ve got tech companies which are selling at a 40% discount and nobody wants to touch them,” Sweeney said.
“With a long-term mindset, this is great opportunity to buy very good companies which are at the forefront of growth,” he added.
STOXX STAYS IN RANGE (0851 GMT)
Equity markets in Europe have started the third-last session of 2022 up slightly, but indices are sticking to the ranges seen in the past few days, as traders wind down a negative year for stock markets on a cautious note.
The pan-European STOXX 600 SSXXP benchmark index was last up around 0.1%, supported by strength across the mining sector, which in turn is being propped up by optimism over China’s reopening measures, although defensive pharma and rate-sensitive tech are acting as a drag.
EUROPE EYES MUTED START (0715 GMT)
European shares are set to open little changed this morning in typical festive fashion, while worries over the inflationary impact of China loosening its COVID restrictions are offsetting some of the initial optimism over the likely boost to economic activity.
London reopens after a long holiday break, with futures pointing to gains of around 0.5% (FFIc1) for the FTSE 100, while derivatives on the euro STOXX 50 (STXEc1) and DAX (FDXc1) were trading flat. Wall Street futures edged higher.
Over in Asia, trading was choppy, underscoring the cautious mood that is dominating the last week of 2022. The MSCI All-World index IIACWI is on course for its biggest one-year drop since 2008, down almost 20%.
