“There have been warnings about a recession for 18 months now, with all of this apprehension leading to investors thinking that if a collapse is going to happen, they’ll know just when to invest again — short equities, long cash,” says Wieting at a recent briefing of Citi’s mid-year report titled Opportunities on the Horizon: Investing Through a Slowing Economy. “But it’s very hard to get that to work if that’s everybody’s play.”
Global inflation has gradually eased from its peak in 2022. However, central banks — especially in developed economies — have adopted the “higher for longer” strategy of increasing interest rates. With rates creeping higher instead of easing as expected, the US and Eurozone are facing greater pressure on growth. This troubled macro environment has led to a surplus of cash “sitting on the sidelines”, with investors intending to time the market, says Citi Global Wealth Investments in its Mid-Year Outlook 2023.
However, chief economist and chief investment strategist Steven Wieting warned investors that as inflation continues to ease following a period of rapid Federal Reserve (Fed) rate hikes, keeping portfolios fully invested is imperative. He believes plenty can be done to ready investment portfolios for the changes and potential opportunities while preserving and growing assets in the interim.
