Brace for a US recession as Powell refuses to back down

However, markets don’t work like that. If earnings go into reverse in a recession, the Fed will start to ease and investors will look forward to better times.

The valuation multiple might go up to 18. Apply that to $200 of earnings and you end up at 3,600. I think the FTSE 100 will do a bit better, on account of its lower starting value, and end the year at 7,800.

This is the nuts and bolts of my first prediction, that the market falls a bit and then recovers and ends the year higher than it started, if not by a huge amount. It’s a muddle-through year. By then, however, the momentum will be upwards so investors should drip their money into the market in the early part of the year to make sure they are fully invested when shares do turn upwards again.

I recently made four fund recommendations to play this scenario, and I will be investing my ISA and SIPP contributions in these.

The Dodge & Cox Worldwide Global Stock Fund and the Edinburgh Worldwide Investment Trust can both invest all around the world, but they are very different. The first is defensive and conservative, the other is much higher octane and risky.

Because I expect bonds to also do well in 2023, I have included the Colchester Global Bond Fund. As a nod to the fact that no-one can predict the future with any certainty, my final recommendation is a balanced fund, the Pyrford Global Total Return Sterling Fund.

Please do remember that I know nothing about your personal circumstances, so this is not advice. It’s just what I’m doing. Happy Christmas.

Tom Stevenson is an investment director at Fidelity International. The views are his own.


Leave a Comment

Your email address will not be published. Required fields are marked *