After the failure of Silicon Valley Bank, the war in Ukraine and the cost-of-living crisis, Close Brothers Asset Management looks at the outlook and investment opportunities in 2023.   

Despite the challenges, Isabel Albarran, investment officer at Close Brothers Asset Management believes that the UK economy will improve in 2023 and inflation rates will fall to 4 per cent by the end of the year.

Speaking at a media event last week, Albarran said: “We have seen a lot of monetary tightening over the past 12 months and we are close to the peak.” 

“Energy prices, which were driving inflation in Europe, have dropped. Europe was lucky to have a mild winter and its response to reducing its reliance on Russian energy supplies was amazing.The outlook for the EU is better than expected. It won’t be a stellar year for growth but it is better than expected,” she added. 

“The fact that China is opening up after its zero-Covid policy is good news, and it’s an important driver for global growth. Growth there is stronger than expected, although there are still some concerns,” she said. Albarran believes that growth in China will slow over the longer term, as the right governance measures are still not in place and there are geopolitical risks. “Countries like the US are continuing to isolate China which will become an issue,” she said.  

Albarran also believes that it is a softer outlook for growth in the UK, but it is better than predicted. “We could even avoid a recession and growth in 2024 will be stronger,” she added. 

Investment opportunities
In this adverse economic climate, chief investment officer at Close Brothers, Robert Alster, highlighted the benefits of having a diversified portfolio and the opportunities of investing in undervalued firms for an investor's portfolio: “We are cautiously optimistic. We get quality assets in a downturn.” 

He said that the firm’s exposure is neutral across asset classes, for equities, fixed income, alternatives and cash. But he added that the asset manager was underweight in bonds and it has moved to neutral in the past six months. “It’s a good place to be,” he continued. “The firm is also strong on defensives in the equity space,” he said. 

Alster believes that tech is an important long-term theme and highlighted the investment opportunities of ChatGPT. He thinks that ESG investing continues to be a long-term trend, although it took a back seat with the war in Ukraine. Alster also believes that UK and European banks are less likely to run into trouble than US ones, following the collapse of SVB, as they are much larger and less fragmented than their US counterparts.