Mackenzie Investments, one of Canada’s largest fund managers, is turning less optimistic about stocks and sees better value in bonds after the 13 per cent rally for global equities in the first half.
Central bankers’ campaigns to raise borrowing costs are starting to have an impact on the economy and will eventually force investors into a more defensive mode, Lesley Marks, Mackenzie’s chief investment officer of equities, said in an interview. There’s a 60 per cent chance of a U.S. recession in the next 12 months, according to economists in a recent Bloomberg survey.
“We think that as the data continues to unfold throughout the rest of the year, people will see that the economy is in fact slowing,” crimping corporate earnings, she said. “The relative value exists right now in fixed income.”
The firm’s strategists recommend adding investment grade debt and going underweight stocks.
Mackenzie’s view echoes growing wariness among global managers that the rally in equity benchmarks is out of sync with the economic reality. While a boom in artificial intelligence has powered gains in global tech stocks, masking weakness in other sectors, hawkish central-bank rhetoric is denting optimism about an economic soft landing.
Marks said any recession is likely to be mild, but “the slowdown in the economy is going to play a stronger role in the outlook for equities” in the second half of 2023.
