2023 is set to be a story "story of two halves" after last year saw valuations for asset classes across the board tumble dramatically, according to Anastasia Amoroso, iCapital's chief investment strategist. The stunning plunge in asset prices, however, has created a promising entry point for investors, Amoroso told Insider. Markets moves will likely be muted in the coming months as the economy endures slowdown and the central bank brings the Federal Funds rate higher, she explained. "Any sort of rally will likely be capped by a Fed that's still trying to get to 5% and stay there," Amoroso told Insider, referring to the US central bank's interest rate increases intended to bring down inflation.The second half of this year, though, will be a key pivot point once the terminal rate is higher than core PCE inflation. That would give the Fed leeway to either hold rates steady or cut them by June, and importantly for markets, lay the groundwork for a new rally. "The times you want to invest," according to Amoroso, "is when economic data is falling apart, not surging."Lower entry points for investorsThe economy so far has absorbed the Fed's higher interest rates well, in Amoroso's view. But should the Fed pause midyear, that would give the economy more room to breathe and markets after last year's broad sell-off.And given iCapital's subdued outlook for the first half of 2023 and expectation for rebound later, Amoroso maintained that investors can capitalize now by adding to positions or entering new ones."Whether you look at equities, or the reset likely to occur in private market valuations and real estate, I would use the next 3-6 months to be deliberate and methodical about adding to those positions," Amoroso said.
In stocks, she noted that early outperformers have included the semiconductor and consumer discretionary sectors, but also said alternative assets present a buying opportunity. "We like private credit because amid the pullback in public markets, the banks are not as eagerly lending to companies," Amoroso said. "So a lot of the attention turns to private credit managers, who can be a source of capital, and they're able to secure better terms for investors."Amoroso also said cryptocurrency offers plenty of innovation, but with that there's been a great deal of leverage and mishandling of funds. "The froth, the fraud, the exuberance will hopefully be worked out of the system, and what will come after that is regulation, which should give investors more confidence [in crypto]," Amoroso said. "What remains in the ecosystem will be companies that have viable solutions with viable cash flows."