Maritime metaphors abound in the financial space, including some of our own in reference to Ted Kutscher’s paintings. Schwab, in its 2023 outlook, has a nicely phrased one:
Cross currents continue to rock the economic boat, even though we believe a brighter year is on the horizon.
In January, we’ll send our own review and outlook, but for the moment, we share with you Schwab’s short 2023 Market Outlook, which highlights two prominent indicators that speak to a high likelihood for U.S. and global economic recessions. Indeed, we may be in a recession already. While mentioning the lower price of stocks, the piece emphasizes the opportunities in bonds, which finally pay attractive yields after more than a decade of ZIRP (Zero Interest Rate Policy) and the painful exiting of that regime through the Federal Reserve’s current interest rate hiking cycle.
While we agree that quality matters with both stocks and bonds, as we’ll address in our letter, quality may be found in some unexpected ways. After all, “quality” is really about the durability of investment returns, which is our focus for you whether we’re crafting an investment policy, allocating among asset classes or looking for managers and funds to express our views.
Read 2023 Market Outlook: Cross Currents from Schwab Center for Financial Research.