Picking investable assets for a portfolio can be hard. Fundamental analysis focuses on what investors believe will happen in the future. Quantitative investing, by contrast, focuses on the facts: how historical data relationships may give us insight into future market moves, helping us to systematically select assets on the basis of signals or factors. 

After a bright start, US mortgage-backed securities face a sunnier year in which this fixed income asset class could reverse part of the gloomy outcome of a challenging and volatile 2022. With the peak in inflation behind us and the end of the US Federal Reserve’s rate rising cycle in sight, investors have an opportunity to benefit for a likely bounce-back. 

In what can be expected to still be volatile currency markets, the US dollar looks set to lose further ground in 2023 as its lustre as a high-yielding hedge fades. Expect the euro and the Japanese yen to pick up the baton as both economies profit from the gradual reopening of the Chinese economy now that Beijing has dropped its strict Covid-fighting regime.   

We anticipate a better year for emerging market corporate debt on the back of a brighter outlook for China and the wider Asian region. However, a raft of uncertainties including those concerning  inflation and geopolitics, could make for a volatile environment in 2023. 

Since biodiversity loss affects large swaths of the economy, it should be front of mind for investors. Not least because, as Adam Kanzer (https://viewpoint.bnpparibas-am.com/authors/?authinfo=5641https://viewpoint.bnpparibas-am.com/authors/?authinfo=5641), head of stewardship for the Americas, points out, nature loss also makes meeting the world’s climate goals harder. 

Sergey Pergamentsev, head of Institutional Structured Management in the Multi Asset Quantitative and Solutions team, and co-head of the Investment Insights Centre Andrew Craig discuss recent developments in liability-driven investing (LDI), a strategy institutional investors such as pension funds use to match investments and future liabilities. 

The sell-off in bond markets this year has driven yields to levels that merit closer attention, says Victoria Whitehead (https://investors-corner.bnpparibas-am.com/author/victoria-whitehead/), senior portfolio manager for European investment-grade (IG) credit. Victoria sees eurozone IG credit as attractive on the basis that risk premia are commensurate with much higher default rates than she thinks will actually materialise. 

Slower growth (and eventually, lower rates of inflation) will likely come in 2023 thanks to restrictive central bank monetary policy. What conclusions should investors draw for their allocations to equities and fixed income around the world? 

Thematic environmental strategies face countervailing forces in the near term. Support may come from the ‘green shoots’ of the recent growth stock recovery, offset by the downdraft of recessionary risk. Investors with a longer-term view should stay focused on the tailwinds and enduring drivers of demand including regulatory and legislative support. 

While many bond investors have felt the earth move under the feet this year as the asset class experienced the finale of a 50-year bull market, the denouement has not stripped them of opportunities, Arnaud-Guilhem Lamy (https://viewpoint.bnpparibas-am.com/authors/?authinfo=5653), head of euro aggregate bond management strategies, tells chief market strategist Daniel Morris.