Julius Baer believes that after a heated year of continuous tightening from the Fed, 2023 is going to be a cooling down period. 

Bhaskar Laxminarayan, CIO and head investment management APAC at Julius Baer said this week that from an investing point of view, 2023 has an opportunity set which is actually greater, not lesser. 

“We think the investment grade has become very attractive – the straight and simple way of investing in bonds has become real again, after decades of low interest rates where only people who could go high yield could see returns,” he said. 

“There is a big opportunity set in fixed income investing, where equities are likely to be more volatile at the start of the year. Hedge funds have a bigger role to play in portfolio construction this year – hedge funds are heading back to the 1990s and up to the beginning of 2000, when they had a good run. Private equity remains a core part of portfolio construction” he continued.
 
“This year’s story is recession, rather than inflation, but it is not yet clear how long or strong the recession will be. Strong employment figures and higher wage growth (almost at 5 per cent, a number not seen for decades) look to put a stop to any deep recession or hard landing, in our view. It is going to be a glorious year for bond investing, and there is no better time to buy into equities from a long-term perspective. Portfolio diversification remains key in 2023,” he continued.
 
“China’s GDP growth will be a positive surprise, but it will be a challenge to sustain it. China is not ex-growth, but the period of US ‘consuming’ and China ‘manufacturing’ is over, as is the cost advantage of new technology. This is going to cause a new paradigm, as far as manufacturing and economic growth is concerned, and means policymaking will change almost every couple of years, with periods of easing and tightening in much narrower spaces than before,” he said.
 
“We are quite positive on EM India, as the number of unicorns has gone up significantly, with more innovation, greater access, and ease of business. The middle-income population is also growing and represents a huge potential of money,” he continued.

“There is, however, a need to be structurally bullish on India to be invested there. Japan is also an interesting market from an equity perspective. We advise a multi-manager approach when it comes to hedge fund investing,” he said.