A large majority of institutional investors anticipate a recession in 2023.
New data from Natixis Investment Managers Outlook Survey found at least 80% of institutional investors in all regions, apart from Asia, believe their economies are or will be in a recession next year.
The survey reports that institutional investors—who of those surveyed manage a combined $20.1 trillion in AUM—foresee a challenging road ahead as we roll into the new year. Six out of ten say a recession is inevitable, and 65% believe stagflation will be the bigger risk in 2023.
Institutions were split on what the outcome of policy would be on economic performance, with 53% of institutional investors projecting a soft landing and 43% expecting a crash landing. In fact, 49% say that a soft landing is an unrealistic expectation.
Market outlooks remain relatively positive – for some
Despite the recession threat, institutional investors were more likely to have an optimistic outlook on the market for 2023. For example, as central bankers raise rates to curb inflation, 56% say they are bullish on bond market performance in 2023. A little over half (51%) of institutions say they are bullish on stocks for 2023.
Cryptocurrency saw a tough year in 2022, and next year will be no less, investors anticipate. Eighty-two percent of those surveyed believe digital assets will underperform in 2023, with 63% stating crypto is not a “legitimate investment for institutions,” due to current volatility. The crypto industry faced harsh winter conditions earlier in June with mass layoffs, and again in November after the fall of the world’s second largest crypto exchange, FTX.
Another factor halting institutional investors from investing in crypto is the current regulation—or lack of—surrounding the asset class. Sixty-one percent believe greater clarity in regulation would be a boost to crypto.
Instead of focusing on crypto, institutional investors have their eye on gold. Seventy-six percent of respondents believe gold will outperform digital assets in 2023. Or, when considering crypto, 83% of institutional investors believe the real revolution is blockchain.
Investors are going green
Environmental, social, and governance (ESG) investing is catching eyes in the new year. Over half (59%) of institutions are planning to increase ESG investments, with 62% believing there is alpha to be found in sustainability.
Half of institutions surveyed who own green bonds plan to increase their investments, while 47% will maintain their current allocation. Only 4% plan to reduce their holdings.
The numbers are encouraging to ESG advocates, whose adoption still remains quite low despite high interest from investors. “Green” investing has been gaining attention from investors, plan sponsors, and large retirement industry leaders like BlackRock and Vanguard in the past several years.
Last month, The Department of Labor (DOL) cleared ESG funds in 401ks with their final rule, allowing retirement plan fiduciaries to consider climate change and other ESG factors in their investments.
SEE ALSO:
- Americans Point to Inflation for Lack of Retirement Savings
- 5 Ways Inflation is Changing Retirement Planning
- Recession Fears Not Stopping Women from Maintaining (or Increasing) 401k Contributions
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
