Investment professionals in the U.S. and Canada believe the economy already is in or will be in a recession this year, says a survey by Natixis Investment Managers. The ‘2023 Natixis Investment Managers Pro Fund Selector Survey’ found 85 per cent believe a recession is underway or starting and 52 per cent think the markets are underestimating how long it will last. They see a central bank policy error as the biggest potential threat to the U.S. and Canadian economies. Yet their outlook for the markets is surprisingly optimistic, with a mostly bullish forecast for stocks (63 per cent) and bonds (56 per cent) in a year when actively managed investments are expected to shine. The survey found 73 per cent of respondents are either maintaining (45 per cent) their average eight per cent return assumptions for client portfolios this year or plan to adjust return assumptions even higher (28 per cent). As well, 52 per cent expect interest rates to continue rising, while another 28 per cent think the U.S. Federal Reserve / Bank of Canada will take a pause. Just 20 per cent think rates will start to come down this year. Given the rippling effect of rates on the markets, 81 per cent predict the stock market will be equally (34 per cent) or even more volatile (47 per cent) than last year and 57 per cent say valuations still don’t reflect company fundamentals, even after repricing that led to nearly a 20 per cent decline in the S&P 500 Index last year. It also shows 52 per cent think the recession will expose the inadequacies of passive investing, which 51 per cent believe has distorted relative stock prices and risk-return trade-offs, and 64 per cent say contributes to bigger market swings when there are large flows into and out of passive investments.
- PWC