As we enter 2023, many investment experts are recommending more defensive investment strategies given expectations for slower economic growth and corporate profit declines. Key investing themes for 2023 center around positioning portfolios defensively by increasing exposure to sectors like healthcare, consumer staples and utilities. Looking overseas for investment opportunities and considering real assets are also common suggestions for the year ahead.
Favor defensive sectors like healthcare, consumer staples and utilities
With profits forecasted to decline in 2023, history shows that defensive sectors like healthcare, consumer staples and utilities tend to outperform during periods of slowing growth. Healthcare provides essential products and services that see steady demand regardless of economic conditions. Consumer staples produces the food, beverages and household items that remain necessities even in downturns. Utilities satisfies the continual need for power and energy. Emphasizing these defensive areas can help buffer portfolios from volatility.
Search for opportunities in overseas markets
While the US dollar’s strength and America’s economic outperformance make domestic equities appear attractive, overseas markets actually generated higher returns last year in dollar terms. Global profit growth is projected to decline almost everywhere, but US earnings are predicted to fall the most. Meanwhile, ex-US markets are dominated by more defensive and value-oriented sectors. Maintaining a global perspective allows tapping into this greater resilience and diversification.
Consider investments in real assets and infrastructure
Many experts advise positioning for a world which is deglobalizing and refocusing on domestic production capacity. Years of underinvestment have left US infrastructure like energy systems, manufacturing plants and transportation networks in need of upgrades. Channeling capital into fixing these real assets critical for economic stability seems likely in the years ahead. Similarly, private real estate stands to benefit from onshoring trends that may drive construction and property demand.
The outlook for 2023 favors defensive investing strategies centered on steady earners like healthcare and utilities stocks along with overseas assets and real asset plays.