M&G Investments: Quarterly Equities and Multi Asset Outlook - Q2 2023

When you cannot predict, prepare

In the current market backdrop, two drivers matter for markets: the forthcoming central bank decisions, and the likelihood, timing and depth of a recession.

• While the direction of datapoints may be relatively easy to infer, the timing, pace and extent are far more difficult to pinpoint.
• When we cannot predict, we must prepare: we need to assess the various possible scenarios that could influence market behaviour, and be prepared to take advantage of opportunities while minimising the impact of risk.

The resilience of markets, particularly equities, has surprised many. Such resilience could persist in the months ahead, albeit not without bouts of volatility. At a broad index level, equity and fixed income valuations appear to be accurately reflecting the risks and opportunities presented by the current macroeconomic backdrop, but pockets of mispricing are occurring at a more granular level, creating opportunities for active investors. We are finding attractive opportunities in Emerging Market (EM) sovereigns, Investment Grade (IG) credit, high-quality cyclical stocks and Asian equities in particular. We maintain our stance that this is not a market for ‘broad strokes investing’, rather one where selection is the main driver of alpha, diversification is key and volatility has to necessarily become our friend.

To read the note in full, please click 2023 Equities & Multi Asset Outlook