hello in this week’s etf wrap blackrock’s gargi chaudhuri head of ishares investment strategy for the americas discusses ways for investors to play a world of higher rates and elevated inflation in 2023 please send feedback and tips to christineidzelismarketwatchcom you can also follow me on twitter at cidzelis and find me on linkedin as investors assess the damage inflicted on asset prices by rising interest rates in 2022 an environment of higher rates should favor valuestyle equities in 2023 while bonds offer “tremendous” opportunities for income according to blackrock’s gargi chaudhuri head of ishares investment strategy for the americas “we probably have not seen the bottom in the equity market yet” chaudhuri said in a phone interview “historically whenever you thought of buying the dip you thought of buying tech” so the notion that value stocks may outperform next year is “a departure from a decade of growth leadership” according to a note wednesday from chaudhuri that provides investors a guide to 2023 as investors consider the impact of the federal reserve’s rate hikes on the stock market and potentially allocating more to equities value stocks are an area that should fare relatively well she said by phone investors might consider the ishares russell 1000 value etf iwd and ishares msci usa value factor etf vlue as options chaudhuri suggested “we have moved away from a world of lowtonegative real rates to a world of higher rates” she said investors should think about “what parts of the equity market are going to thrive in a positive and sustained higherrate regime and that actually points to value” at this point it seems unlikely that the fed will over the next three to six months “suddenly turn around and start cutting rates” she said the central bank has been aggressively raising rates to combat high inflation hikes that some investors worry could tip the us into a recession while chaudhuri currently anticipates that a recession is likely in 2023 she said that investors who believe that the fed may “engineer a soft landing” for the us economy might consider buying smallcap equities rather than growth stocks in a regime of higher rates she pointed to the ishares core sp smallcap etf ijr as an option shares of the etf are down 111 this year through november according to factset data that compares with a 144 drop over the same period for the sp 500 index which chaudhuri described as “very heavily oriented toward technology companies” investors should consider “rethinking the role of bonds” in their investment portfolios in 2023 according to chaudhuri’s note which cited the ishares 13 year treasury bond etf shy ishares 15 year investment grade corporate bond etf igsb and ishares mbs etf mbb as potential buying opportunities like stocks bonds have been hurt by rising rates in 2022 “the repricing of yields and the return of income has really created a tremendous absolutely extraordinary opportunity in the bond market” chaudhuri said by phone “investors have to rethink the role of bonds in their portfolio as a result of income” for example investors may now be able to allocate more of their portfolio to fixed income to achieve a 65 yield compared with 2015 a chart in her note shows in 2015 investors had to go “a lot further out in the risk spectrum” for a 65 yield potentially by owning more junk bonds or equities she said by phone as for the surge in the cost of living of this year blackrock expects that it’s unlikely that core inflation will fall back to prepandemic levels of below 2 even if it eases as investors adjust to “living with inflation” chaudhuri indicated in her note that the ishares tips bond etf tip and ishares us infrastructure etf ifra may provide exposure to equities that historically are “attractive in a higher inflationary regime” she also cited the ishares msci global agriculture producers etf vegi as an investment option amid elevated inflation as usual here’s your look at the top and bottomperforming etfs over the past week through wednesday according to factset data   chinafocused etfs jump amid sign the country may be on path toward looser covid policies marketwatch   proshares launches etf investing in miners of metals for batteries powering electric vehicles marketwatch   antiark etf’s creator is losing fund in break from new firm bloomberg