38% of the strategists surveyed by Natixis think central bank inflation targets won’t be met until 2025, said a poll published on 24 July. Photo: Shutterstock

38% of the strategists surveyed by Natixis think central bank inflation targets won’t be met until 2025, said a poll published on 24 July. Photo: Shutterstock

A market outlook study published by Natixis Investment Managers on 24 July found that 69% of investment professionals in the US and Europe rate inflation as a high (22%) or moderate (47%) risk for the second half of 2023. But Natixis strategists say they are less concerned by a possible recession.

Natixis’ survey of 32 investment professionals in the US and Europe, which took place at the end of June, paints an “uncertain picture” for the second half of the year. 26 respondents came from affiliated asset managers, four from Natixis Investment Management Solutions and two were representatives form Natixis Corporate & Investment Banking.

In their they cover topics such as inflation, fixed income, equities and recession risks.

Inflation: 69% see it as high or moderate risk

47% of market strategists in the survey saw inflation as a moderate risk for the rest of 2023, compared to 22% who saw it as a high risk and 31% who viewed it as a low risk.

More than one-third (38%) of survey respondents thought that central bank inflation targets would only be reached in 2025. 28% thought the targets would be reached in the second half of 2024.

63% of strategists thought that housing will contribute to lower inflation in the second half of the year. Lower energy prices and food costs may also help bring inflation down.

However, 72% of survey respondents named inflation lingering for longer than anticipated as a fixed-income concern for the second half of 2023.

Interest rates outlook

44% of surveyed strategists said they expect the European Central Bank’s interest rates to be between 3.5% and 4.0% at the end of 2023. 31% expect slightly higher rates--4.0% to 4.5%.

38% of respondents said that higher rates than anticipated are a fixed-income concern for H2. Rates staying high for longer than anticipated is also a concern for 38% of strategists.

According to Natixis, 69% see a central bank mistake as a medium (53%) or high (16%) risk for fixed income markets in the second half of the year.

Expected headwinds, lower recession risks

Central bank policy was a top expected headwind for Natixis strategists, cited by 72% of respondents. 72% also named geopolitics, such as Russia’s continued war in Ukraine and US-China tensions, as another market headwind.

Recession risks have decreased. In a Natixis survey conducted in November 2022, 59% of institutional investors thought “recession in 2023 was inevitable,” and 54% said that a recession was “absolutely necessary” to curb inflation.

But in this most recent survey--conducted at the end of June 2023--50% rated the risk of recession in H2 as low, 31% said it was a medium risk and only 19% said it was a high risk. 6% said a recession was inevitable in the second half of the year.

Find Natixis’ full market outlook .

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