Why 2023 will be the year of the income investor

More immediately, much of the market is focused on the Chinese government’s COVID restrictions, and what impact a relaxation or lifting of those measures would have. Mackenzie’s 2023 outlook noted that easing those policies could cause inflation to remain stickier than expected.

“On balance, the relaxation of the zero-COVID policy will generally be positive for the market domestically in China, and the Chinese consumer,” Marks says. “That will be additive to economic growth in the region, which will likely contribute to an increase in expectations for China to offset the significant slowdowns that other regions are experiencing.”

Looking ahead, Marks says 2023 is set to be the year for income investors. As risks started to pile up over the course of 2022, there’s been a significant correction in both equities and fixed-income investments, including lower-risk asset classes like Government of Canada bonds and U.S. Treasurys.

“We think that next year, in the face of what is likely to be an economic slowdown and potentially a mild recession, will be a very good market for fixed-income investors, where you have a fairly low risk security at an attractive yield,” Marks says. “That’s something we haven’t seen for a very long time.”

Based on its view of a soft-landing or moderate-recession scenario, Mackenzie sees high-quality investment-grade credit as an attractive asset class. The current yields on government bonds, particularly on the short end of the curve, also make them very attractive, Marks adds.