New research from Natixis Investment Managers signals a broad consensus from industry experts that the U.S. is either currently in or headed for a recession.
According to the research, which surveyed 441 fund selectors at leading wealth management, private bank, and insurance platforms in 28 countries, 84% of these experts believe the U.S. economy is already in or will be in a recession in 2023.
The research comes as the Federal Reserve released its consumer price index (CPI) numbers today, finding that the CPI-U rose more than expected in January at 0.5%, and the CPI increased 6.4% compared to a year ago. With January’s data indicating a rise in inflation, the U.S. may be in danger of falling into a recession later in the year.
Fifty-one percent of respondents to the Natixis research believe interest rates will continue to rise, and another 28% expect the Federal Reserve to pause rates in 2023. Just 21% think rates will slow down this year.
Volatility is here to stay
Fund selectors who were surveyed in the Natixis research anticipate volatility to continue in 2023. More than half (51%) project that stock market volatility will increase over the next 12 months, with 37% expecting bond volatility to increase and 35% anticipate it to stay at the same level.
Due to volatility projections, Natixis says fund selectors will be eyeing several indicators—one being dispersion, or the difference in returns among securities. Forty-one percent of respondents believe dispersion of returns will be higher in 2023. The research finds this is one reason as to why 73% of respondents call for active management to outperform passive investments this year.
Expect more ESG
Natixis found more selectors are turning to third-party managers to enhance their offerings, with one-third of respondents adding that they are looking for managers who can deliver model solutions for environmental, social, and governance (ESG) investing.
In fact, the research believes ESG model capabilities will rise in 2023, as close to half (49%) of fund selectors said their firms plans to add these portfolios to their offering.
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