Jacques Henry, Head of Equities Pictet Wealth Management.

2023 could be an odd year with a shallow recession but with persistent inflation leading potentially to positive sales growth.

Cash return to shareholders through buybacks and dividends is expected to slow in 2023 but still support equity returns.

With wages increasing and less ability to pass higher costs to customers, margins are expected to contract in 2023, eating into the positive effects of continued sales growth and share buybacks.

The expected slight decrease of 2023 earnings per share will make equity valuation the main driver of equity return. High valuation relative to historic and relative to the current yield regime is the main reason for our equity underweight in the US. In terms of valuation, Europe is better positioned than the US despite our underweight in both regions.