Experts Share Their Takes on What to Expect in 2023 –

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Life is never boring when you work in PPC. And we’ve seen that in the eventful year that was 2022.

If it was not the push toward more automation, it was about the migration to Google Analytics. If it was not about the impending “cookiepocalypse”, it was about adapting to the economic downturn.

With 2023 just around the corner, it’s good to know what to expect from the industry and what to get ready for even though PPC is still much of “it depends”.

That’s why we reached out to 10 experts in the PPC industry to know their predictions and recommendations to help you prepare for 2023.

We also discussed these predictions on PPC Town Hall. You can watch the full episode below.

Liz Young, SoFi

Respect the Cycle

Economic imbalances are what got us into this mess. They need to be fixed before we get out. If things like inflation and the labor market are not brought back into balance, they could breed bigger problems with long-lasting consequences. We are quite decidedly late-cycle now, and it’s healthy to let the cycle reset. But respect it—the market and the cycle don’t care about our feelings. They also don’t care about the date on the calendar, so don’t get too wrapped up in “seasonality” as a buy or sell signal.

We may need to go through some economic pain in order to set ourselves up for a durable expansion—both in markets and the economy—on the other side. A Fed pivot is more likely to occur as things are breaking, not as they’re being put back together. Market rallies don’t send the “all clear” signal, cycle resets do.

If You Can Be One Thing, Be Specific

As we near the end of 2022, an overarching theme for the year was “a lot of stuff went down.” But what happened under the surface was, it didn’t all go down by the same magnitude. In 2023, with the Fed likely still hiking, or at the very least staying restrictive to start the year, I expect the dispersion between sectors, asset classes, and specific stocks to be wide.

As an investor, what that means is you’re better off being specific about where you put your money, rather than throwing it all at “risk assets” in hopes of a broad rally. I believe a recession in early 2023 remains the base case, and that one more market flush is likely before a recession is confirmed. Positioning for what could win coming out of it, and what you would buy in a drawdown is a good way to prepare for the new year. Some of the sectors on my watch-list would be: Financials, Health Care, Communications, Software, and Small-Cap Value stocks.

Ryan Detrick, The Carson Group

Tailwinds Ahead?

If there is any good news about 2023, it is how bad 2022 was. The truth is, stocks down back-to-back years is super-rare, over the past 50 years happening only twice in ‘73/’74 and three years during the tech bubble implosion. But many of the headwinds from 2022 are likely going to be tailwinds now. The Fed is quickly realizing they don’t need to be so hawkish with inflation coming down like an anchor, while the U.S. dollar likely will weaken significantly as well.

Meanwhile, the economy is on much better footing than the media claim. Yes, housing is in a vicious recession and manufacturing is close to a recession, but those two together make up about 25% of the economy. A big part of the remainder of the economy is the consumer, which remains extremely strong and healthy. To us, 2022 was an economic slowdown in the face of 40-year highs in inflation and a historically hawkish Fed.

Honestly, it is amazing how strong the economy was in the face of those issues. But the key being a slowdown, not a recession. As we look out to 2023, better-than-expected earnings is likely and this will be a nice driver for a bounce back in economic growth and double-digit stock gains.

Anastasia Amoroso, iCapital

Slowdown Almost `Fully Baked’

Whether it ends up being called a recession or not, the slowdown we’ve all been waiting for might happen in the next two quarters. This means that the first half of 2023 might be the entry point back into risk(ier) assets.

The recipe for a slowdown is ready to be fully baked. Typically, there is a period that passes when the Fed stops hiking rates, yield curve inverts, and recession onsets (if it does) around 15 months after. But then again, the Fed generally doesn’t hike rates in a weakening economy. What might make it different this time around is that the Fed has been hiking at an aggressive pace since the summer (+75 basis points [bps] per meeting), all while the economy, as measured by the manufacturing, service, and housing slowdown, has been weakening.

In fact, we did print two consecutive quarters of negative GDP growth in 2022 already. Looking ahead, consensus expects GDP in the first and second quarter of 2023 to be slightly negative at -0.1%,while 1-year recession probabilities continue to be elevated on most metrics. Jobless claims have started to inch up, tech layoffs are starting to accumulate, and other industries may follow suit. And yet the Fed still plans to hike the fed funds rate up to 5%, further restricting the economy. All in, the economy should be poised to slow meaningfully in the months ahead, given all this pressure.

Bonds bull market over, recession for winter

Schroders Australia deputy head of fixed income, Kellie Wood

Kellie Wood predicts a recession in the middle of 2023, due to the “unprecedented speed, magnitude and synchronised monetary policy tightening”.

And with the long-running secular bull market coming to an end, she believes active management will account for a greater portion of total return.

“Active management of core fixed income exposures should be a far more compelling alternative than has been the case in the recent past given the restoring of value across the global fixed income universe,” says Wood.

“We believe most of the underperformance in bonds is now behind us – with a peak in yields and the market fully priced for this interest rate cycle given the level of inflation within economies.”

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