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Investment Strategy

Published May 15, 2023 | 10 min read time

Weekly market insights and possible impacts on investors from the Wells Fargo Investment Institute Global Investment Strategy team.

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Global Macro Spotlight: Navigating volatility around the debt ceiling debate

  • We believe the U.S. debt default risk to be low, as both political parties have strong incentives to raise the debt ceiling, but the rekindled debate will likely increase volatility in both fixed income and equity markets.
  • We reiterate our preference to position more defensively ahead of near-term market concerns, of which the debt ceiling is only one.

Equities: Earnings shrink for the second consecutive quarter

  • After falling 2.4% in the fourth quarter of 2022, S&P 500 Index earnings are tracking lower by 3% – 4% in the first quarter of 2023.
  • We believe earnings will be challenged in the coming quarters as companies deal with a recession. In this environment, we suggest focusing on quality and prefer U.S. Large Cap over U.S. Mid Cap and U.S. Small Cap Equities.

Fixed Income: T-bills caught in debt ceiling crossfire

  • Delays in raising the debt ceiling have added to volatility in the Treasury bill (T-bill) market, especially for those T-bills maturing sometime in June 2023.
  • For investors who own T-bills maturing around this timeframe, we believe that the best course of action is not to panic and to wait for the maturity date to receive their principal and interest back. In case of a delay, investors will be made whole and paid additional interest once the situation is resolved.

Real Assets: Our view on gold — Rally may extend into 2024

  • We upgraded Precious Metals from neutral to favorable on April 21.
  • Our 2023 year-end target range for gold is $2,100 – $2,200 per troy ounce, and our 2024 year-end target range is $2,400 – $2,500 per troy ounce.

Alternatives: Demystifying General Partner-led secondaries

  • General Partner (GP)-led secondaries have become an increasingly important part of the private asset secondary market.
  • Given the challenging exit environment and capital market conditions, we expect a robust opportunity set for GP-led secondary investors.

Article written by:

Senior Investment Strategy Analyst
Investment Strategy Analyst

Global Equity Strategist

Global Fixed Income Strategist
Investment Strategy Analyst
Head of Real Asset Strategy

Senior Investment Analyst