How Barclays prefers bonds over stocks for 2023 🏦
Stocks give you partial ownership in a corporation, while bonds are a loan from you to a company or government. These are some of the basics you learn when studying financial literacy, yet, when it comes to investing, most people primarily invest in stocks. For this reason, Barclays, the giant investment bank, recently revealed that, if it came down to it, they would choose to invest in bonds over stocks concerning their outlook for 2023. So why did Barclays say this? According to Barclay’s analysts themselves: “the global equity markets may drop significantly further despite this year’s drawdown. U.S. stocks tend to bottom 30% to 35% below their peak in the middle of a recession, which suggests a “fair value” of 3,200 for the S&P 500 index at some point in the first six months of 2023″. Due to this, investors will soon be able to make 4.5% a year or more sitting on cash as they wait for asset markets to bottom.
Moreover, the recommendation to prefer fixed-income assets over stocks comes not only in light of the recession beginning soon and peaking within the first six months of next year but because fixed incomes have “massively underperformed” equities this year and there is now “limited downside in longer U.S. fixed income” according to Barclays. If you still insist on investing in stocks over the next year, Barclays has cited “the biggest downside risks” to be in the industrials, discretionary, and materials sectors, while the least risk will be in defensive sectors like healthcare, consumer staples, and utilities. What do you think about Barclay’s recommendations?
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.