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Chris Iggo, CIO Core Investments of AXA IM, visited Amsterdam to present the outlook for 2023. It is specifically determined. We spoke to him before the event. What is the main message that you like about reliabilitys?“That the solved problem will come to an end, as a result of which interest rates will no longer rise. That makes the story of 2023 100% different from this year. 2023 will revolve more around the opportunities that can be achieved with bonds than with equities. With an economy that is not doing well, the dip will make it difficult for companies to grow their profits.” Indeed, why would investors want to get into the stock market now? Would it not be wiser to await the effects of the mixed recessions? Earnings expectations are also still too high, according to the consensus. “That is exactly how many investors are in it now. Liabilities are safer and give a reasonable guaranteed income. The stocks databricks ipo is found online. With bonds, a return of 5% can easily be booked. That is more likely than stocks can earn. In any case, the risks are much less. With a war, high energy prices and an impending recession, there is little reason to buy stocks now. Yes, I expected stocks to be lower next year. Certainly US equities are still expensive with an average PE of 16, based on the expected earnings at the end of last year. This corresponds to the historical average, but we are not living in an average time now. “Yes, I expected stocks to be lower next year” On the other hand, sentiment can quickly change.” Where are the best opportunities in the bond market?“We are particularly fond of European creditworthy corporate obligations with terms between 1 and 3 years. They give a return of 4%. as a result, we are positive on European bank loans. Now that the ECB is reducing its balance sheet, these bonds may outperform. After all, bank loans were not part of the buy-back programme. These bonds do not have much credit risk. Capital ratios are strong enough to absorb economic shocks. This is also clear from the many stress tests. “Now that the ECB is building its balance sheet, banking liabilities can outperform” With bank stocks being valued low these days, we’re presumed about that too. This does not apply to equities from cyclical sectors. They are much more at risk in an upcoming recession.” Finally, what can give wings to the stock markets in 2023?“Of course it would be positive if the war in Ukraine ended next year. In that case, energy prices will fall. Everyone benefits from that, the energy companies. They get the hardest of all with all the investments in sustainable energies. They are not on our purchase list. They’ve had their run now.”
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Frequently asked questions
Why should investors consider bonds over stocks in 2023?▼
Interest rates are expected to stabilize in 2023, making bonds more attractive. Bonds offer safer returns around 5% with lower risk, while stocks face headwinds from potential recession and remain expensive relative to earnings.
What bond investments does AXA IM recommend?▼
AXA IM favors European corporate bonds with 1-3 year maturities offering 4% returns, and European bank loans which may outperform as the ECB reduces its balance sheet. These bonds carry low credit risk with strong banking capital ratios.
Are bank stocks a good investment in 2023?▼
Bank stocks are currently undervalued and could be attractive investments. However, cyclical sector stocks face higher recession risk and are not recommended for conservative portfolios in the current environment.
What could boost stock markets in 2023?▼
An end to the Ukraine war and falling energy prices would positively impact markets. However, energy companies have already had their run and are not on AXA IM's purchase list due to ongoing sustainable energy investments.
Why are US equities still considered expensive?▼
US stocks trade at a PE ratio of 16 based on expected earnings, matching historical averages. However, current conditions are not normal—with recession risks, high energy prices, and geopolitical tensions making valuations less attractive than bonds.