Investors could be rewarded during Q1 ‘peak opportunity’
As we progress into the New Year and global investors review their portfolios for the upcoming 12 months, I believe the economic peak opportunity will likely be towards the end of the first quarter.
Until that time, we’ll see rising unemployment and central banks will likely maintain their aggressive language in a bid to curb inflation – which should be down sharply from current levels by then. Particularly as demand for staff is declining rapidly, helping to ease wage inflation, yet it will be well over the 2% target set by central banks.
As I was quoted by Yahoo! News Newsmax, Advisorpedia, Investor Ideas, Value Walk, Financial Newswire, The Motley Fool, Startups Magazine and Forkast News, amongst other media, this could perhaps be when stocks will hit their cyclical bottom and investors will reap the rewards for taking the plunge.
However, in Q2, we may see risk assets begin to price in a cyclical upturn in the G7 economies. Those assets that fall the most between now and then could turn out to be the strongest performers during this recovery rally.
There will also likely be cyclically sensitive sectors, such as autos, industrials and consumer discretionary.
So, what could spark this recovery? It will likely be central banks bringing an end to rate hikes and easing their inflation rhetoric as the 2% target in major western economies looms, businesses cutting back rapidly along with indications of economic stabilisation.
As such, it’s crucial that investors remain diversified in multi-asset portfolios, with exposure to equities, bonds and alternative asset classes. Attempting to time the market is almost always impossible, so investors should now be starting to position themselves for the cyclical upturn.