A recent Citi Global Wealth Investments (CGWI) report has predicted the weakest annual global economic growth in forty years, outside of the global financial crisis and pandemic shutdowns.
The report reveals that a mild US recession could occur, but this is expected to impact areas such as the Eurozone more heavily.
However, the report does argue that if The Fed does not pause rate hikes until it sees the contraction, a deeper recession could be seen in the US. Additionally for the US, CGWI predicts US inflation will continue to ease and end 2023 at around 3.5%, and the US Federal Reserve will cut interest rated by the second half of the year.
CGWI argues that Asia could avoid recession in 2023. They expect to see emerging market Asian real GDP growth reach 5% in 2023, after having dipped to 4% in 2022. China is believed grow, as it begins to ease its pandemic restrictions, with the report predicting a rebound of between 3.5% to 4.5%.
Globally, CGWI is expecting to see a 10% drop in global earnings per share, but anticipates this to grow again in 2024. The report forecasts investors will focus on 2024 recovery during 2023.
CGWI sees these areas of potential opportunity:
- Short-term US investment grade fixed income amid today’s higher interest rate environment;
- Defensive equities such as resilient dividend payers as the bear market continues for now;
- Non-cyclical growth equities to bottom before cyclicals once the Fed pivots to cutting rates;
- A subsequent entry point into more cyclical equities;
- “Deep value” in select non-US assets and currencies once the US dollar peaks;
- Certain alternative strategies to position for distressed and other opportunities following the recession;