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(Bloomberg) — Traders ought to judiciously add extra danger in 2023 now that US inflation has peaked and recession fears are “much less ominous,” based on KKR & Co.’s Henry McVey.
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Despite the fact that market volatility will persist for the subsequent 12 to 18 months, cash managers ought to start investing extra capital in areas together with infrastructure and personal credit score, McVey, the chief funding officer of KKR’s steadiness sheet, mentioned in an interview earlier than Monday’s launch of the agency’s 2023 macroeconomic outlook.
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After sharp declines in shares and high-yield bonds this yr, and with new debt issuance and preliminary public choices at their lowest ranges since 2009, now’s the time to start including danger again into portfolios, mentioned McVey, who’s additionally head of worldwide macro for New York-based KKR.
The approaching yr “will in all probability be an excellent classic for investing in non-public markets,” mentioned McVey, 53.
KKR lower its 2023 US inflation forecast to three.9% from 4.8%, and expects nominal GDP development to sluggish to about 4%, from 10% in 2022. It sees company earnings declining subsequent yr earlier than rebounding in 2024, and a weaker US greenback.
Massive-cap tech shares are nonetheless over-owned by establishments and particular person buyers, and that a part of the market is due for a correction, McVey mentioned. Equities associated to life sciences, knowledge safety and power safety are extra enticing development alternatives than social media and search, he mentioned.
Slower development and better rates of interest in 2023 will even take a look at some firms that also have an excessive amount of debt, posing refinancing dangers, he mentioned. Providers inflation might stay elevated, pushed by rental revenue and wage development, and an unstable geopolitical local weather, McVey mentioned.