GDIM Investment Market Review & Outlook | January 2023

The new year has so far brought more cheer than its predecessor and it will hopefully continue in the same vein. 2022 broke records for the falls sustained at the start of the year and the pessimism was almost unrelenting until the summer. While we are more optimistic for this year as a whole, we know that it is likely that recession will hit much of the world in the next few months and this will restrict economic growth in the near term.

It is clear that most central banks are not yet satisfied that interest rates are sufficiently high enough to quash inflation which has plagued markets, and conditions will be tougher for households and businesses in the next few months. Earnings have already started to reduce for many companies, but we anticipate further weakness in many areas before recovery takes hold.

As we have alluded to before, our holdings in defensive sectors such as infrastructure, healthcare and staple goods provide a solid grounding for our more defensive portfolios. An increased proportion to dividend-paying stocks will diversify us away from companies that may struggle to maintain profit margins. We also have a solid bank of fixed-income instruments, or bonds, that are providing a robust income stream with scope for their capital values to rise too. These assets are generally already expecting the next few increases in interest rates so should prove resilient.

Overall, despite the numerous challenges, we do expect a positive year for portfolios but one which is weighted toward a better second half after a more difficult first. We feel that it remains appropriate to be cautious until there are signs of improvement.

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