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Here is our 2023 investment outlook. I did this a little differently this year by providing a scenario analysis with different probability distributions. I think this is a much better way of analyzing potential outcomes and will allow you to better understand the range of outcomes.

My overarching view is that the range of outcomes still remains very wide because we’re digesting the COVID boom which is evolving into a bust. This means that portfolio concentration is likely to be a high-risk endeavor and that broad diversification remains wise as we navigate this strange period. The Discipline Index was bearish in 2022 and still remains bearish. It’s hard to see that changing unless stocks fall substantially and/or the economy stabilizes significantly. On the other hand, markets are starting to digest the changes. Equities, despite still being unusually risky, look much more attractive than they did a year ago. Meanwhile, investors want to bail on bonds, but they look more attractive to me than they have in a very long time. Being able to buy a Treasury Bill at 4.75% is a gift in my opinion. Even junk bonds at 8% are starting to look decent. But it’s still going to be a year of patience in my view and one that will test your discipline at times.

I wish you all a very happy new year. I hope you enjoy this outlook and find it useful as we all try to navigate the coming year.

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