The biggest investing trends to bet on in 2023

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Good morning,

2022 was the worst year for the stock market since the Great Recession. Even though we’re continuing to operate in uncertainty, there’s hope for investors seeking positive returns in 2023.

Fortune’s Quarterly Investment Guide, released this morning, shows that there’s some light at the end of the tunnel for the markets, but you may have to reach it in unexpected ways. And the guide is chock full of surprising trends and hints at where the smart money is moving that will be of interest to anyone in finance.

Where to invest in 2023: 5 surprising strategies for beating the indexes this year,” is a report by Shawn Tully that explores Research Affiliates’ forecasts on future returns. Chris Brightman, CEO of Research Affiliates (RA), told Tully that by almost any metric the stock market is now offering much better returns over inflation than at this time last year.

One of Brightman’s surprising strategies? Don’t bet too much on bonds. “RA’s negative view on most bonds contradicts what the fixed income markets are saying,” Tully writes. “The best deals, Brightman says, are in Treasury Inflation-Protected Securities or TIPS.”

He told Tully: “The persistence of inflation that will likely be higher than the markets are predicting means government bonds aren’t a good place to be. But corporates are more attractive, and much more attractive than last year.”

The U.K. is facing a “deeper and more prolonged recession” than any nation in the G7, according to a recent Financial Times survey of economists. Debt finance is highly unattractive to CFOs in the U.K. as they are bracing for a recession. And the EU grew GDP at an annual rate of just 0.6% in the first three quarters of 2022.

However, Brightman surprisingly ranks Europe as the world’s most promising market. “Companies are not countries,” he told Tully. “You might have higher GDP growth in the U.S. than in nations such as the Netherlands and Switzerland, but that doesn’t mean that Unilever or Royal Dutch Shell or Nestlé increase their earnings more slowly than comparable companies in the U.S. (You can read the complete report and more surprising strategies here.)

Speaking of corporations, the report, “The 11 best stocks to buy for 2023 as the market splits into a ‘tale of two halves’ according to Bank of America,” highlights some that are worthy of investment.

Bank of America finds that Walmart “reigns in the in the consumer staples sector,” Lucy Brewster writes. “The high-quality stock has a favorable ESG rating from Bank of America and benefits from consumers who might be trading down if the economy worsens.”

Meanwhile, in the industrials sector, “Bank of America singled out aerospace technology producer Honeywell as a stock to buy due to its quality and ESG rating from Bank of America,” Brewster writes. “The company also benefits from automation and decarbonization trends.”

Fortune‘s finance team also reported on investing moves to kick off 2023, lessons from a terrible year in investing, the countries where the stock market is soaring and more. You can find the complete Quarterly Investment Guide here.

See you tomorrow.

Sheryl Estrada

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