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The views expressed are those of the authors at the time of writing. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional, institutional, or accredited investors only.
Our latest quarterly snapshot of sentiment among Wellington’s investors suggests a relatively bearish tone among the 100 or so survey participants, driven by concerns about further inflation surprises, particularly in Europe, as well as the potential for a more severe economic downturn. Specifically, given still surging eurozone inflation, we asked participants about their expectations for the region’s inflation rate by the end of 2023. While our respondents anticipate a significant moderation from current inflation levels in the eurozone, nearly three-quarters forecast inflation of more than 3.5% (Figure 1), above the current Bloomberg consensus of 3.4%. This stickier inflation outlook also led our participants to take an above-consensus view on the level of German 10-year bond yields in 12 months’ time.
In light of the recent events in the UK, we also asked participants to name the region, country, sector or industry group that they expect to be the “problem child” of 2023. Unsurprisingly perhaps, given the above-consensus view on European inflation and yields but also the vulnerability of the region to Russia’s aggression, 22% of our respondents view Europe as the top “problem child”. However, a sizeable number of participants also worry about Japan and China/Taiwan, with both coming a close second at 19%. From a sector perspective, housing and technology were rated the top two “problem” areas and a large proportion of respondents (64%) expect US house prices to decline by 5% or more in 2023.
Wellington’s recurring macro survey originated from a conversation three of our macro thinkers had over six years ago about Philip Tetlock and Dan Gardner’s book Superforecasting. Tetlock and Gardner argue that forecasting is a skill that can be improved, and we thought their theory could work well in practice at Wellington, given the firm’s collaborative culture. The hope was to sharpen our collective and individual forecasting skills, enhance our internal investment dialogue, reveal where our views differ from the market consensus and identify how they change over time. The resulting internal survey gathers the anonymous responses of macro-minded investors across all disciplines, asset classes and office locations. The precise formulation of the questions is important. Wherever possible, our questions aim to be precise, time-bound, measurable, probabilistic and rollable from one quarter to the next so as to give us a richer data set over time. We think the results can pinpoint where the firm’s views differ from the consensus and can also reveal important shifts in our collective thinking.
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Commodities: Top ideas and evolving opportunities
To help clients plan for the coming year, our commodities experts share their top near-term, medium-term, and long-term investment ideas.
Global Economic Outlook
Our macro strategists continue to expect that the interlinkages between countries, central bank policies, and market pricing will change, creating potentially attractive opportunities for active portfolio management and security selection.
Early 2024 resolutions: Enjoy the yield but be smart with your surplus
What should insurers expect from markets as we approach the end of the year? Tim Antonelli, Head of Multi-Asset Strategy – Insurance and Portfolio Manager, offers his views and identifies areas that may be worth a closer look.
Is bad news for the economy actually good news for markets?
While it has taken longer than expected, higher interest rates are starting to take their toll on the global economy and the "bad news is good news" market narrative could be changing. Members of our Investment Strategy team offer their macro and market outlook, including their latest views on equities, bonds, and commodities.
What if US wealth inequality reverses?
Our experts examine the role of wealth inequality in the US economy and the potential investment implications of a reversal in that dynamic.
Long/short investing in European equities' growing dispersion
We explore how growing dispersion in European equity markets is driving opportunities for long/short investors, fueled by structurally higher inflation, changing market leadership, and a renewed focus on valuation.
US regional banking sector update
We explore how banking regulation and legislation could impact US regional banks, including highlighting the potential for M&A activity and for dispersion to drive long/short opportunities.
Economic and market forecast in six charts
This visual summary of Wellington Management’s 2023 Outlook captures insights on economic and market forces shaping investment results from specialists from across our investment platform.
Commercial property values shrinking? No problem for big cities
We analyze the impact of declining office property values and outline the reasons why they believe large cities should be able to weather the storm of shrinking commercial property value.
Why cash won’t cut it for long: The case for bonds
Global Investment and Multi-Asset Strategist Nanette Abuhoff Jacobson and Investment Strategy Analyst Patrick Wattiau explore the relative potential benefits of bonds versus cash.
What AI could mean for fixed income
Fixed Income Portfolio Manager Brij Khurana details the potential effects of artificial intelligence on the fixed income market.