GRIMALDI & PARTNERS: A few question marks, but no reason for pessimism
By Silvano Grimaldi, CEO Grimaldi & Partners
Zurich – 2022 was a year of crisis. Many investors are wondering if the worst is over. Are stocks or bonds preferable? As an investor, how should I best position myself for the new year 2023? Silvano Grimaldi, CEO of the independent asset management company Grimaldi & Partners AG, gives you the answers to these questions.
Disappointing 2022
In general, practically all forms of investment – bonds, stocks, real estate and even gold – gave investors little joy in 2022.
The higher key interest rates led to rising yields on government and corporate bonds and to significant price losses on these securities.
In 2023, too, interest rate levels and company profit expectations will not only be decisive for the general situation on the capital markets, but above all for the specific development of individual assets.
Global economy 2023
Global economic growth will almost certainly be slightly lower in 2023 than in 2022. However, the data currently available indicate that, despite phases of economic weakness, an overall economic recession is not to be expected in either the USA, the euro zone or Switzerland.
Despite a slight decline in incoming orders, the order backlog means that industrial production will continue to increase. In many service areas, too, demand will at least remain stable.
Fiscal and monetary policy stimuli suggest that GDP growth in 2023 will be significantly higher than in 2022.
Inflation trends and monetary policy
Inflation rates will remain relatively high in 2023 and will be above the levels targeted by the central banks for some time. Despite the economic risks, the central banks will remain restrictive for longer.
For 2023 as a whole, relatively high interest rates are to be expected. Even if the key interest rates reach their peak in the course of 2023, interest rate cuts should only be expected after a return to the inflation rates targeted by the central banks that appears certain.
Price and yield development on the bond markets
As long as key interest rates have not yet reached their peak, there is no reason to expect an end to the rising bond yields. Currently, however, bonds with short to medium maturities from solid (creditworthy) companies continue to offer opportunities for attractive returns.
However, the average returns on shares in strong companies are above the returns that can be achieved on solid government and corporate bonds over the years. Such
Equity markets
Many analysts seem to be inevitable for a significant economic slowdown in the coming months. However, the fear of serious economic slumps is decreasing, and rightly so.
In 2023 it will become even more important to evaluate the potential of listed companies more precisely and to invest selectively.
In view of the high valuations, further price setbacks in the share indices cannot be ruled out due to the economic uncertainties. Many of the currently negative factors are already priced in, but experience has shown that it usually takes a long time for all investors to see the opportunities in stocks with low valuations, high cash flows and dividends.
Market-strong companies with pricing power can hold their own even in an environment with high inflation rates and economic difficulties.
Conclusion
The prospect of secure dividends will remain an important factor for investment decisions in the future. After the start of the economic recovery expected in the second half of the year, investors can also count on capital gains as the share prices of these companies rise again.
The EU's "Digital Markets Act", which will come into force in 2023, will force many tech companies - especially US companies - to rethink their business models. In the long term, however, technology companies should again outperform the overall market. Equity markets usually anticipate coming downturns earlier than the real economy. Investors should therefore be on their guard and take advantage of opportunities that arise, for example in the telecom and semiconductor sectors. However, shares in companies from the food and health sector and from the automotive and supplier industry, which has a lot of catching up to do, also have considerable catch-up potential due to the current low price-earnings ratios (P/E). (Grimaldi & Partners/mc/ps)
© 2023, Grimaldi & Partners Ltd.
GRIMALDI & PARTNERS Vermögensverwaltung is a renowned independent Swiss asset manager domiciled in the city of Zurich. The main bearers Silvano Grimaldi, lic.oec. HSG and Dr. iur. Reto A. Lyk are distinguished former bankers with an excellent reputation and more than 25 years of professional experience in asset management in the Zurich financial center. The top-class management team ensures flawless management of the business for the benefit of the customers. Grimaldi & Partners stands for independent, neutral, transparent, cost-conscious, performance-oriented asset management with better asset protection.
GRIMALDI & PARTNERS AG
Rautistrasse 33
8047 Zurich
Phone: 044 520 00 10
Email: info@grimaldi-partners.ch
