Asset manager DWS discusses the macroeconomic outlook and opportunities for investors in 2023.

The turmoil observed, especially on the equity and bond markets in March, did not come as a surprise, but a full-blown credit crunch is unlikely, Björn Jesch, global chief investment officer at DWS, said this week. 

“The historically rapid and aggressive tightening of monetary policies, sooner or later, triggered the kind of turbulences we have now seen in the banking sector,” Jesch continued. 

“Banks will probably tighten their lending standards but a full-blown credit crunch is rather unlikely. These events have once again demonstrated that it pays to have a well-diversified portfolio,” he said. 
 
Corporate bonds
Thomas Höfer, head of investment grade credit, added: “The first few months of this year have been rather turbulent for fixed-income investors. They had to bear with unusually high volatility. However, all in all, bond markets have performed well. Both, sovereign bonds and corporate bonds generated decent returns.” 

On a 12-month horizon, he is optimistic about corporate bonds with a good credit rating (investment grade), particularly bank bonds. “The disruptions which we have recently experienced in the banking system have not changed my positive assessment,” Höfer said. “The spreads of senior bank bonds over bonds from other industrial sectors have reached levels unseen since the financial crisis of 2008,” he added. 

According to Höfer, European banks are in a much better position today with a view to capitalisation, liquidity reserves and quality of fixed assets than they were back in 2008. For this reason, he expects spreads to narrow in the months to come, resulting in rising bond prices.

In March, two-year US government bonds also registered their best monthly performance in three years. “Since the beginning of 2023, fixed-income assets have generally yielded solid gains,” Jesch continued. “Gold, which is traditionally a safe haven in times of crisis, also posted a convincing performance. In the months to come, we consider corporate bonds and small-to mid-caps in Europe to be particularly promising,” Jesch said. He also sees good opportunities in selected investments in emerging markets, for both bonds and equities.

The positive outlook for bonds has also been highlighted by other asset managers. DWS Group has €821 billion ($900 billion) of assets under management, with locations in Germany, Europe, the Americas and Asia.