Outlook

Robeco's outlook for 'short-term pain, long-term gain' warns that 2023 is likely to see recession, and that investors need to wait for inflation, interest.

“There can be no backtracking on climate: the evidence about climate change continues to mount, and COP27 highlighted that political will is key to shaping the balance between climate ambition and implementation,” Graham says. “We could see another backlash against social media and more regulation on large technology and social media platforms as data protection issues come to the fore again,” says Graham. We could see a multinational ‘super fund’ set up to facilitate the net zero transition, backed by several governments.” The problem is that it has also led to a rise in greenwashing, where companies and investors make ESG claims that cannot be substantiated, often for PR and marketing reasons. Then there is the possibility of a ‘shock regime change’, as witnessed when the UK which went through three prime ministers in 2022. “This would expose investments that were only funded because cash was ‘free’ at the time.” “It could claim that the 2% target is far too close to zero, saying the next recession could tip the economy into outright deflation,” Graham says. The problem here is that in 2022, there was little difference between any of them. “Here, US inflation peaks without a recession, the dollar drops, and the US Federal Reserve (Fed) can rest easy but remain vigilant,” says Colin Graham, Head of Multi-Asset Strategies at Robeco. The result for multi-asset investors is that high yield bonds become very attractive as default rate expectations fall.” Even worse is the prospect of deflation. The current consensus isn’t that rosy, but if history tells us anything, it’s that nothing is ever set in stone.