(Bloomberg) -- Mackenzie Investments, one of Canada’s largest fund managers, is turning less optimistic about stocks and sees better value in bonds after the 13% rally for global equities in the first half. 

Central bankers’ campaigns to raise borrowing costs are starting to have an impact on the economy and will eventually force investors into a more defensive mode, Lesley Marks, Mackenzie’s chief investment officer of equities, said in an interview. There’s a 60% chance of a US recession in the next 12 months, according to economists in a recent Bloomberg survey. 

“We think that as the data continues to unfold throughout the rest of the year, people will see that the economy is in fact slowing,” crimping corporate earnings, she said. “The relative value exists right now in fixed income.” 

The firm’s strategists recommend adding investment grade debt and going underweight stocks. 

Mackenzie’s view echoes growing wariness among global managers that the rally in equity benchmarks is out of sync with the economic reality. While a boom in artificial intelligence has powered gains in global tech stocks, masking weakness in other sectors, hawkish central-bank rhetoric is denting optimism about an economic soft landing.

Pacific Investment Management Co. is among those firms warning about the possibility of a recession in some developed markets due to high policy rates, making high-quality government and corporate bonds attractive.

Mackenzie, a unit of IGM Financial Inc., has C$190 billion ($143 billion) under management, including balanced portfolios. The Mackenzie Ivy Global Balanced Fund nudged its fixed income allocation to above 24% as of the end of May, from 21% at the end of last year, while trimming stocks. The vast majority of its bond holdings are investment grade. 

Marks said any recession is likely to be mild, but “the slowdown in the economy is going to play a stronger role in the outlook for equities” in the second half of 2023.

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Within equities, investors should favor less cyclical sectors that will perform better in a tougher economy, such as health-care and consumer staples stocks, Marks said. She also likes Japanese equities, whose benchmarks are trading near the highest levels in more than three decades. 

“It’s been an ignored market for a very long time outside of this year,” she said. The Bank of Japan may yet be forced to adjust its policy of yield curve control, which would strengthen the yen, to the benefit of foreign owners of Japanese stocks, Marks added. Mackenzie’s Tokyo-listed holdings include medical equipment maker Terumo Corp. and retailer Seven & I Holdings Co., according to fund disclosures dated May 31.  

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