By Chris Taylor

NEW YORK (Reuters) – If there was only one word to sum up 2022, “unpredictable” might be the most accurate.

Yet we all enjoy trying to predict the future, especially when it comes to our finances – to protect ourselves from the downside, or to take advantage of the upside.

What does 2023 hold for investors? We talked to some leading lights in the financial world about the road ahead.

Prediction: Debt bomb

Sarah Newcomb, director of financial psychology at Morningstar

“I’m concerned about the lack of saving in America as a whole. Inflation may be slowing, but data from the Federal Reserve shows consumer borrowing has been steadily rising. It seems we’re funding our more expensive lifestyles with debt.

“That can only last so long, and with rising interest rates, it concerns me. We had a moment of higher savings rates when the pandemic first hit, and people realized they needed to be prepared for anything. Once the shock wore off, spending and borrowing picked back up, and I fear we didn’t learn our lesson. I am concerned about increased bankruptcy rates, loan defaults and overall financial stress in 2023.”

Prediction: Boring wins

Carrie Schwab-Pomerantz, president of Charles Schwab Foundation and managing director of Charles Schwab & Co.

“I predict that in 2023, timeless money principles will win out and more people will decide that ‘boring is best’ when it comes to managing their finances. Tried-and-true principles that have helped people build wealth for generations will be the hottest trend in finance: investing for the long term; building a portfolio grounded in asset allocation and diversification; establishing an emergency fund; limiting debt; and maxing out your 401(k).

“Of course, trendy investment ideas will pop up as they always do, but it’s important to remember there is no get-rich-quick solution. Getting back to the basics will foster strong financial foundations as we face economic headwinds in the new year.”

Prediction: Bonds are back

Kristy Akullian, iShares senior investment strategist at BlackRock

“Bonds will be back in 2023 in a way we haven’t seen in decades. In an otherwise challenging investment landscape for the year ahead, we see tremendous value in high-quality fixed-income and believe others will as well.

“No longer just the remit of retirees, attractive yields will attract a new cohort of buyers to the asset class: Newer investors looking for less volatility, Millennials with near and medium-term investment objectives and multi-asset managers who see opportunity to outperform. Already, ETF flows are starting to show a shift in investor preferences – watch for much more of this in the year ahead.”

Prediction: “Unstoppable trends” will ride out recession

Jim O’Donnell, CEO of Citi Global Wealth

“We’re focused on what we call ‘unstoppable trends’ like healthcare – especially in areas like biologics, life science tools and age tech – that are likely to give investors access to companies with long-term growth prospects. Aging and growing populations are likely to boost spending on healthcare innovations.

“This growth, paired with the fact that the healthcare industry is least tied to current economic conditions, makes this a potentially attractive sector for suitable investor portfolios.”

Prediction: Headwinds for small business

Asahi Pompey, Global Head of Corporate Engagement, Goldman Sachs; President of the Goldman Sachs Foundation

“For small business owners, the financial success of their businesses will become even more deeply intertwined with their personal financial situations as the economic climate remains uncertain. The optimism of these entrepreneurs for continued growth in the new year points to resilience amid some tough financial decisions they’ll likely make in 2023.

“For instance, we expect to see a rise in debt consolidation as business owners look to combat the rate environment. And while entrepreneurs will continue to invest in their businesses, growing their personal savings will be increasingly important to buffer against continued inflationary pressures.” 

Prediction: Consumers hunkering down

Chris Britt, Co-founder and CEO at Chime

“My prediction would be that American consumers in 2023 are going to hunker down and focus on building more solid foundations for their financial future. The data is clear that people’s confidence is at extremely low levels right now, not seen since the early days of pandemic.

“Since millions of consumers use us as their primary account, we can actually see where money is going. We are seeing far less movement into more volatile investments, like crypto transactions, and more movement into safer investments like high-yield savings. That signals to us that people are preparing for what could be a very challenging 2023.”

(Editing by Lauren Young and Josie Kao; Follow us @ReutersMoney)

---