The year 2022 was one of market uncertainty due to lasting effects of the COVID-19 pandemic, rising inflation and geopolitical divide. All those triggered drastic sentiment swings, resulting in market rotations along factor, sector and country lines.
In 2023, the backdrop of higher inflation and slower growth will bring about even more volatile economic cycles in the decade ahead, driven by a multitude of factors including a still-rebounding supply chain and increased desire to onshore strategic sectors amid security concerns.
Allocators are at a crossroads of managing risk while generating returns in such a challenging market.
In this environment, adhering to a long-term mindset remains critical, as several secular trends will fundamentally restructure global markets and corporate success for decades to come. Our analysts have found that global equity thematic investing trends are, on average, only half as sensitive to economic cycles compared to global equity sectors.
Without the constraints of short-termism driven by the volatility of today's market, thematic equity investors can focus on thorough investment research, direct engagement with companies and agile active management — proven to be critical drivers of outperformance.
As we and other asset allocators enter 2023, we must take a step back to consider forward-looking structural trends affecting both industry leaders and their peers. Three themes we believe will weather the risk of an economic slowdown in 2023 are rapid digitization, aging demographics, and climate change and sustainability.