A new Natixis Investment Managers survey indicates growing optimism among economists and investment strategists about the financial landscape for the second half of the year.
Of the 32 market strategists surveyed in its 'Natixis Centre for Investor Insight', only half saw a recession as low risk. This contrasts sharply with November 2022, when 59% of institutional investors believed a 2023 recession was imminent.
By mid-2023, this pessimistic view dwindled to 6%. Key indicators such as thriving markets, attractive bond yields and a decline in global inflation rates have spurred this positive sentiment, said Natixis. US inflation dropped from 6.5% in June 2022 to 3% by H1 2023, Eurozone's reduced from 9.2% to 5.5% and the UK's decreased from 10.5% to 8.7% by May 2023.
However, 38% of strategists anticipate that inflation targets may not be met until 2025. For 72%, geopolitics and central bank policies remain major concerns, but 25% dismiss geopolitical tensions as inconsequential for H2 2023's market dynamics.
Corporate earnings are another worry, found the survey, with two-thirds expressing concern. Mabrouk Chetouane, head of global market strategy, solutions, Natixis IM, said, "Inflation is cooling off, but we aren't through the woods yet. Strong consumer spending, inflated cost of services, and geopolitical tensions may keep inflation lingering for longer, resulting in higher rates for some time. Strategists generally think it will take until 2025 until targets are met."
Opinions vary on which market will lead by the end of 2023: 34% favour the US, 22% back Japan or other emerging markets, while 6% are optimistic about China, with the UK receiving no support.
The NASDAQ's 30% H1 returns, driven by AI-led tech advances, caught attention. An overwhelming 88% of strategists see AI as a potential boon for uncovering investment opportunities but also worry it might boost deceptive practices.
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