Three Income Themes for Multi-Asset Investors in 2023
Income Options Are Broader than Many Investors Think
The landscape for multi-asset investors, particularly those on an income path, has shifted dramatically. Yields began the year at the bottom of their 10-year ranges but will likely finish near decade highs (Display). High-yield credit, for example, offered a yield to worst of 4.2% in late December 2021, not much more than high-dividend equities. Now, it’s more than doubled that level.
This scenario played out across income-generating investments, including investment-grade bonds, hurting near-term returns for income seekers. But it also leaves investors with a wide range of opportunities, provided they have the flexibility to consider a broad spectrum of asset classes.
Looking to 2023, we think income-oriented multi-asset investors should consider three key themes:
1. Seek Diversified Sources of Equity Return
Income investors naturally favor the reliability of high-dividend stocks, especially lately. With their defensive characteristics (stable income streams and more mature business models), dividend-payers proved steadier as markets grew choppy during the year—in fact, the sell-off for high-dividend stocks was half that of cap-weighted equities in 2022.