GBM’s 2023 Outlook Showcases Opportunities for Investors

Grupo Bursátil Mexicano’s (GBM) outlook for 2023 forecasts stable monetary policy despite the looming economic slowdown. While 2022 was a challenging year, the group believes that the market dynamics will be different in 2023 due to inflation, changes in monetary policy, an economic slowdown and political conflicts.

“2023 will be a different year, in which we can expect monetary policy to remain rather stable and subsequently to even have an accommodative bias. It could even be expected that after 1Q23, there will be room to rewind policy,” says Andres Maza, Chief Investment Officer, GBM. The changes will respond to the looming economic slowdown, argues the organization. 

One of the main changes will be the response to inflation. Central banks worldwide have taken aggressive measures to curtail inflation and analysts expect it to slow down, which will allow central banks to relax their policies and give the markets room to breathe. Central banks are also expected to reverse their stance regarding monetary tightening until the end of the year or even in 2024, switching to an easing cycle to normalize their rates and support their economies.

Market concerns are centered primarily on the economic slowdown. Growth expectations for most countries during 2023 have been declining and it is even likely that some regions will enter a recession at some point during the year. Most countries have a 50% or higher chance of entering a recession in the next 12 months, says Maza.

Geopolitical conflicts Will continue to be of concern. The Russian invasion of Ukraine still shows no signs of ending and will continue to be a source of uncertainty and instability in the near future, particularly for the EU. On the other hand, tensions between China and Taiwan regarding their sovereignty, and even conflicts between the US and China, could resurface this year, although the base scenario forecasts that these conflicts do not escalate significantly as they would imply high costs for all involved. 

Investors could take advantage of these challenges by turning to debt markets, where they can obtain returns that have not been seen in several years without the need to incur riskier investments, adds Maza. Despite the risks and uncertainty, patient investors could capitalize on the market opportunities. 

Diversification continues to be the best strategy to protect against unexpected risks, adds Maza. Stocks have been the worst performers so far but this trend could turn around. “We have every confidence that the world stock index will eventually recover its long-term trend; however, no one knows when this will happen,” says Juan Carlos Herrera, Chief of Wealth Management, GBM. In addition, bonds should start to perform better, and soon. Although last year saw a decline in bond prices, the rates at which they were issued did not change, so their expected future yield will be higher, assuming the bond issuer has the power to continue making coupon payments and remains solvent. “While this is by no means guaranteed, the entry point for global stocks and bonds today is probably better than it has been in a long time,” Herrera adds.