Leading Bank of America strategist Michael Hartnett expects 2023 will be a year of two halves: first ugly, but then much brighter.
Does the Federal Reserve blink when the US enters recession, or does it make good on its promise to slay inflation, whatever the cost?
But if central banks stay the course on inflation, and extend efforts to unwind 12 years of excessive policy, then markets will further decline, unemployment will rise and the problems in credit markets that always accompany a recession will re-emerge, in a win for the detox bears., predicting not just the steep correction but also many of the bear market rallies, is essentially having a bet each-way in 2023.
But equity investors shouldn’t get too excited – Hartnett expects US stocks to be flat across 2023, with the big gains forecast in copper , investment grade US bonds , and 10-year US Treasuries .Top of the list is going long 30-year US Treasuries, which Harnett says reflects his bet that the Fed cuts late in 2023 on recession worries and rising US unemployment.
His sixth idea is a barbell approach to credit, going long investment-grade credit from the big tech firms , and taking a punt on distressed high-yield debt in Asia, where yields are as high as 17 per cent.
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