There are now first signs on the financial markets that the recession could be mild.

Nevertheless, institutional investors remain skeptical about the coming year.

According to a survey by the French capital investment company Natixis Investment Managers published in the FAZ, almost every second investor rules out a soft landing for the economy.

Six out of ten respondents believe a recession is inevitable.

Markus Fruehauf

Editor in Business.

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Natixis IM surveyed more than 500 professional investors across North America, Latin America, Europe, Asia and the Middle East who collectively manage $20 trillion.

The majority believe that inflation will remain high and central banks alone cannot remedy the situation.

After all, 54 percent consider the recession necessary to bring inflation under control.

Almost two thirds see a recession as the lesser evil compared to stagflation, i.e. a period of negative growth, entrenched inflation and rising unemployment.

Bonds before comeback

Institutional investors are assuming that fixed-income investments will make a comeback.

That's what 72 percent expect.

56 percent are generally confident about the bond markets.

Almost half of the insurers dependent on bonds now expect an average return of 6.7 percent.

Of the investors surveyed, 77 percent want to either maintain or increase their average return expectations of 7.9 percent.

"Despite severe economic headwinds, institutional investors are remarkably bullish on most asset classes and see opportunistic growth opportunities for active managers amid ongoing market dislocations," said Sebastian Römer, Head of Germany, Austria, Switzerland and Eastern Europe at Natixis IM.

"After a decade of rising stock prices fueled by low interest rates, 2023 will be the year when the market recognizes again that valuations matter and the case for traditional fixed income is compelling as well."

Two-thirds of investors no longer consider traditional portfolios of 60 percent equities and 40 percent bonds to be expedient.

In their view, a portfolio made up of 60 percent equities, 20 percent fixed income, and 20 percent alternative investments is likely to do better.

Alternative investments can be direct company investments (private equity), real estate, infrastructure or renewable energies.

More than half of the investors surveyed want to use tactical allocation measures to make their portfolios less risky.

There is a shift towards quality in fixed income and alternative strategies.