A recent report from Citi Global Wealth Investments (CGWI) highlights the potential for the weakest annual global economic growth in forty years, excluding the periods of the global financial crisis and pandemic-related shutdowns.
The report suggests that a mild recession may occur in the US, but areas like the Eurozone could experience more significant impacts. CGWI warns that if the Federal Reserve continues to raise interest rates without first observing a contraction, a deeper recession in the US could be on the horizon. The report also predicts that US inflation will gradually ease, potentially ending 2023 at around 3.5%, with interest rate cuts expected from the Federal Reserve in the latter half of the year.
In contrast, CGWI believes that Asia may avoid a recession in 2023, forecasting a 5% growth in emerging market Asian real GDP, up from a dip to 4% in 2022. China is projected to rebound with growth between 3.5% to 4.5% as it begins to lift pandemic restrictions.
Globally, CGWI anticipates a 10% decline in earnings per share, followed by a rebound in 2024. Investors are expected to concentrate on recovery opportunities in 2024 throughout this year.
CGWI identifies several areas of potential opportunity:
– Short-term US investment-grade fixed income in the current high-interest environment.
– Defensive equities, such as resilient dividend payers, as the bear market persists.
– Non-cyclical growth equities that may recover before cyclical options once the Fed shifts to rate cuts.
– Entry points for more cyclical equities at a later time.
– Select non-US assets and currencies that exhibit “deep value” once the US dollar peaks.
– Certain alternative strategies aimed at positioning for distressed assets and other opportunities post-recession.