11/24/2022 | Press release | Distributed by Public on 11/24/2022 17:06
The five investment themes for 2023 focus on new income sources, strategies to embrace market volatility, responses to the energy crisis, long-term opportunities going beyond the inflation and rates peak, and the energy transition.
"Investors looking for generous and secure yields have access to a large choice of solutions today. The elevated market volatility regime that we are seeing is not about to change. We have entered a new era of structurally higher inflation and greater uncertainty than in previous decades. Inflation and interest rates will decline from current decade highs. Finally, persistently high energy costs will encourage accelerated investment in energy transition and efficiency," saysEdmund Shing, Global Chief Investment Officer, BNP Paribas Wealth Management.
After years of loose monetary and fiscal policies, bond yields fell to nearly 0% or even below zero and investors had no choice but to invest in equities to find reasonable returns. Those days are now past. The recent dramatic surge in bond yields and the widening of credit spreads have created some new interesting opportunities in the bond segment.
We recommend a cross-asset theme (bonds and equities):
The year 2022 will rank as one of the highest years in decades for volatility in global bond and foreign exchange markets given the uncertainty around interest rates and the question of when inflation would peak. In addition, global equities entered a bear market and are experiencing higher volatility amidst mounting fears about the extent of a potential recession.
This environment is creating enhanced opportunities for investing in:
The COVID-19 pandemic, the ensuing economic stimulus and escalating geopolitical tensions have ushered in a new environment of high inflation, largely on the back of a shortage of cheap energy, sharply rising interest rates, and a reversal of globalisation in favour of nearshoring. These shifts are structural in nature and the new economic era require a completely different investing mind-set.
We see investment opportunities in:
Long-term investors should look beyond the peak in inflation and policy rates to the investment opportunities that lower inflation and long-term rates can offer.
This theme focuses on Equities and Fixed Income. Spreads and yields on Investment Grade credit now offer attractive opportunities in:
In the context of global warming, tensions with Russia and soaring fossil fuel prices, the race to find alternative solutions to curb energy spending and reduce greenhouse gas emissions is needed.
We prefer equity solutions for this theme (direct lines, funds and trackers) as well as private equity funds investing in energy infrastructure. This theme has several sub-themes, such as insulation, smart control systems for lighting and signalling, renewable energies and technologies that capture or recycle carbon dioxide.
BNP Paribas Wealth Management is a leading global private bank and the largest private bank in the Eurozone with €408 billion worth of assets under management as at September 2022. Present in three hubs in Europe, Asia and the United States, it employs over 6,800 professionals who support High-Net-Worth, Ultra-High-Net-Worth individuals, entrepreneurs and leading families in protecting, growing and passing on their assets. The bank aims at building a sustainable future by combining its deep expertise and reach with its clients' influence and desire for impact.