State Street Global Advisors, the asset management business of
State Street Corporation (NYSE: STT), today published its 2023
Global Market Outlook: Navigating a Bumpy Landing on macroeconomic
trends and key investment themes for the year ahead. State Street
Global Advisors believes that market uncertainty and volatility
will persist for some time and that investors should evaluate their
fixed income and downside protection strategies as they await a
possible recovery and a better environment for risk-taking.
Despite the slowing global economy and geopolitical headwinds,
State Street Global Advisors remains cautiously optimistic that an
inflection point is in sight and that inflation across the globe
will trend lower within the next six months. The firm believes that
improved supply and slowing demand figures are likely to allow for
powerful disinflationary episodes to unfold, and expects that more
favorable inflation data will allow the Federal Reserve to
downshift from its hawkish stance and likely cut rates in the last
quarter of 2023.
“We have seen the global economic slowdown intensify across both
developed and developing economies, and we have lowered our
projected global growth to 2.6% in 2023,” said Lori Heinel, Global
Chief Investment Officer. “The near 20% appreciation of the US
dollar in 2022 has also intensified the global growth challenge and
may expose unanticipated vulnerabilities.”
Equities walk a tightrope
State Street Global Advisors believes that equities will begin
to sustainably recover in 2023, but points out in its outlook that
the pain equity investors feel is unlikely to subside until
mid-year, with the exact timing of the relief tied to the actions
of central banks.
“Against this challenging macroeconomic backdrop, we are
focusing on quality stocks, by which we mean companies with stable
earnings and strong business models which we believe are resilient
enough to manage pricing pressures,” said Gaurav Mallik, Chief
Investment Strategist. “In emerging markets, the weakness of China
markets and the strong US dollar limit equity opportunities. We
expect that challenges and volatility will remain in 2023, but we
also believe that investors should be prepared for a recovery and
may benefit from deploying dry powder at a prudent time.”
“As 2023 begins, many investors in the US expect the economy to
weaken, corporate profits to face downward pressure, and job losses
to rise due to the lag effects of aggressive Fed rate hikes,” said
Mike Arone, Chief Investment Strategist for the US SPDR Business.
“Markets anticipate sub-trend growth in 2023, but investors will
likely begin to price in the next phase of the economic cycle
before the economic, earnings, and job market data begin to show
signs of recovery.”
A buying opportunity in fixed income
Rising interest rates, market volatility, and widening spreads
across sectors have pressured fixed income total returns with an
intensity that few expected, leading to one of the most trying
years for fixed income investors in recent memory. While headwinds
are expected to continue in the near term, State Street Global
Advisors believes that there will be bright spots for long-term
investors in 2023, as widespread sell-offs and continued volatility
have opened up some attractive opportunities.
Michele Barlow, Head of Investment Strategy and Research, Asia
Pacific, commented, “We see value building in rates and prefer
duration over spread products, and investment grade over high
yield. As more clarity appears on the credit landscape, we see
opportunities for investors to consider global fixed income
markets, including emerging market debt, which has been repriced to
attractive levels. There is growing evidence that a peak in rates
is nearing, so while credit still faces some near-term headwinds,
we think it will be a buying opportunity in the coming
quarters.”
More volatility, more downside protection
In an environment of heightened market uncertainty and
volatility, the firm also highlights in its outlook that investors
need to consider the portfolio guardrails they have in place to
withstand market disruptions.
Altaf Kassam, EMEA Head of Investment Strategy and Research,
added, “We believe that the ‘Great Moderation’ period is over, with
central banks less likely to backstop markets as they fight
inflation and look to reduce their balance sheets. The ‘new normal’
higher-volatility environment should still provide opportunities
for equity investors, but it will also likely feature deeper
drawdowns and shallower recoveries. Actively managing the risk of
the current environment will require effective downside protection
strategies.”
Peak dollar
State Street Global Advisors also thinks that the US dollar,
strengthened by rising relative yields and its appeal as a safe
haven during a tumultuous time since the end of 2020, will reach
its peak and begin to decline in 2023. The firm sees that the most
likely outcome is an environment in which ex-US growth narrows the
gap with US growth. The firm believes that the transition from
inflation to disinflation and a policy shift by central banks to
focus on growth will open the door for a broad rally in risk
assets, particularly non-US equities.
Expiration Date: December 31, 2023
Tracking Number: 5326837.1.1.GBL.RTL
About State Street Global Advisors
For four decades, State Street Global Advisors has served the
world’s governments, institutions and financial advisors. With a
rigorous, risk-aware approach built on research, analysis and
market-tested experience, we build from a breadth of active and
index strategies to create cost-effective solutions. As stewards,
we help portfolio companies see that what is fair for people and
sustainable for the planet can deliver long-term performance. And,
as pioneers in index, ETF, and ESG investing, we are always
inventing new ways to invest. As a result, we have become the
world’s fourth-largest asset manager* with US $3.48 trillion† under
our care.
*Pensions & Investments Research Center, as of 12/31/21.
†This figure is presented as June 30, 2022 and includes
approximately $66.43 billion of assets with respect to SPDR
products for which State Street Global Advisors Funds Distributors,
LLC (SSGA FD) acts solely as the marketing agent. SSGA FD and State
Street Global Advisors are affiliated.
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version on businesswire.com: https://www.businesswire.com/news/home/20221208005201/en/
Michel Chau +44 (0) 7500 682982 mchau@statestreet.com
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