A Constructive View on Growth Stocks
Jennison Associates views growth stocks capitalizing on big secular trends as positioned for prominence amid unsettled broader earnings conditions.
Investors should gain insight in 2023 into matters that inspired widespread uncertainty over the past year. Dr. Sushil Wadhwani, CBE, Chief Investment Officer at PGIM Wadhwani, highlights key questions for the coming year and explains how investors with the flexibility to capitalize on unfolding events can position themselves well no matter what answers ultimately emerge.
Pressing Questions
Whether the Federal Reserve will engineer a soft landing, with interest rate hikes arresting inflation without precipitating a recession, is a critical question given its implications for earnings and, by extension, equities. The short answer to that question, according to PGIM Wadhwani’s models, is probably not.
“We believe a recession in the U.S. is more than 70% likely, and that the probability of a recession in the Eurozone and U.K. is even higher than that,” he said.
Another important question for 2023 involves the approach investors should take to mitigate equity risk in their portfolios. Stocks and bonds traded together throughout much of 2022, revealing shortcomings in traditional long-only diversification efforts emphasizing bonds as an offsetting ballast to equities.
The investment flexibility afforded to strategies that can go long or short is likely to remain very important over the next 18 months, so how you want to trade going into a recession is different from coming out of it.
Answered with Agility
Flexibility and agility can help address both sources of uncertainty.
Based on its recession forecast, PGIM Wadhwani considers the ability to take short positions to be an important option in 2023, particularly in the first half. Should conditions improve before year’s end, the agility to change course and embrace long positions could be crucial as well. Likewise, directional trading and wider latitude regarding investment options can enhance efforts to diversify return sources.
Beyond the obvious questions, flexibility and agility can also demonstrate their value as surprises surface from the precarious geopolitical environment.
View More outlook Videos
The Macro Picture and Market Implications
Daleep Singh, Chief Global Economist at PGIM Fixed Income, looks forward to the Fed reversing course on interest rates as part of his global economic outlook.
Macro Stabilization to Benefit Real Estate
PGIM Real Estate’s Rick Romano sees optimism for public REITs with rare buying opportunities as macro visibility improves and private asset values decline.
The views expressed herein are those of investment professionals at PGIM Wadhwani at the time the comments were made and may not be reflective of their current opinions and are subject to change without notice. This commentary is not intended as an offer or solicitation with respect to the purchase or sale of any security or other financial instrument or any investment management services. This commentary does not constitute investment advice and should not be used as the basis for any investment decision. This commentary does not purport to provide any legal, tax, or accounting advice. PGIM Investments LLC is a registered investment advisor with the U.S. Securities and Exchange Commission. PGIM Custom Harvest does not provide tax, legal, or accounting advice. This material is for information purposes only, and is not intended to provide, and should not be relied on for tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction.
Certain information in this commentary has been obtained from sources believed to be reliable as of the date presented; however, we cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. The information contained herein is current as of the date of issuance (or such earlier date as referenced herein) and is subject to change without notice. The manager has no obligation to update any or all such information, nor do we make any express or implied warranties or representations as to the completeness or accuracy. Any projections or forecasts presented herein are subject to change without notice. Actual data will vary and may not be reflected here. Projections and forecasts are subject to high levels of uncertainty. Accordingly, any projections or forecasts should be viewed as merely representative of a broad range of possible outcomes. Projections or forecasts are estimated, based on assumptions, subject to significant revision, and may change materially as economic and market conditions change.
This material is being provided for informational or educational purposes only and does not take into account the investment objectives or financial situation of any client or prospective clients. The information is not intended as investment advice and is not a recommendation. Clients seeking information regarding their particular investment needs should contact their financial professional.
Prudential Investment Management Services LLC is a Prudential Financial company and FINRA member firm. Jennison Associates, PGIM Custom Harvest, and PGIM, Inc. (PGIM) are registered investment advisors and Prudential Financial companies. PGIM Quantitative Solutions is the primary business name of PGIM Quantitative Solutions LLC, a wholly owned subsidiary of PGIM. PGIM Fixed Income and PGIM Real Estate are units of PGIM. © 2022 Prudential Financial, Inc. and its related entities. Jennison Associates, Jennison, PGIM Real Estate, PGIM, and the PGIM logo are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.
For compliance use only 1065227-00001-00