Global 2023 Outlook for Consumer Discretionary Companies: Troubled Times Ahead
DBRS Morningstar released a commentary titled “Global 2023 Outlook for Consumer Discretionary Companies: Troubled Times Ahead.” Our negative outlook for the sector reflects our view that the operating performance of consumer discretionary companies will generally be pressured as consumer purchasing power continues to be eroded by high inflation and elevated interest rates, and pandemic-related pent-up demand wanes. Consequently, we generally expect the credit risk profiles of companies in this sector, particularly those offering products for which demand is typically more elastic, to weaken in 2023.“We expect the credit risk profiles of the consumer discretionary companies in our portfolio to generally weaken in 2023, although the extent thereof could meaningfully vary on a case-by-case basis. We believe the companies in this sector offering lower-priced products, as well as those offering products for which demand is typically less elastic, will generally be more resilient to the weakening macroeconomic environment than companies that offer more definitively discretionary products or large-ticket items that typically require financing and can easily be deferred,” notes Reid Usher, Assistant Vice President – Diversified Industries.
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