Global outlook 2023 | Central banks' policies to create opportunities for investors: Franklin Templeton

Inflation and the possibility of recession remain the global market’s focal point in 2023, said Stephen Dover, CFA, Chief Market Strategist at Head of Franklin Templeton Institute. He expects inflation to further recede as supply chain pressures ease and central banks will remain committed to tighter policy. However, the result of this policy is likely to be a slowing of the economy and create opportunities for investors, he added.

"Europe is likely already in a recession and the United States is likely to fall into one—hopefully a mild one. Risk/reward profiles seem to favor fixed income over global equities, particularly for the first half of 2023. Any recession and subsequent recovery may well be rapid and create market volatility. We believe it will be as important as ever to be diversified and actively select investments, particularly when tilting toward risk assets," Dover said in his global investment outlook.

Expensive equity prices and the potential for a peak in interest rates have been driving a preference toward fixed income. So, Dover expects investors to search for quality and perhaps increase duration in 2023, with some ideas to consider: