Quarterly Investment Outlook – Q4 2022

2022 was a historic year, where numerous stocks once held to be darlings fell over 75%. Worse, assets which were once thought to be safe also faced historic drawdowns as fixed income had its worst year in well over multiple decades. As we go into 2023, the primary risks we see today are not only elevated probabilities of recessions across the United States and Europe. It is normal for business cycles to occur, and it is necessary for recessions to clear away the deadwood and inefficiencies of the economy. Rather, it is the unwinding of central bank excess, dysfunction in multiple areas of the market, excessive valuations, asset quality and leverage masquerading as illiquidity premiums. Market bubbles tend to wear the façade of narratives and companies previously thought to change the world have seen their valuations deflate rapidly. Asset returns are not only driven by discount rates but also of their underlying quality. While macro winds continue to blow, we remain anchored by fundamentals of the assets we hold. Looming market stress in private markets and the blowup in gilts lend caution to our portfolio construction. We remain flexible and liquid to take advantage of potential market dislocations.

We discuss our outlook and the factors we see as key to drive markets going forward below :

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