Why ASX shares in 2023 are eerily similar to 2019 (and what you should do)

The current year is bearing a lot of similarities to 2019, so it pays to see which ASX shares were successful three years ago.

That's the opinion of Wilsons equity strategist Rob Crookston, who recalled that the economy slowed in 2019, just as it is doing now. 

But no real downturn or recession came along that year.

"In a similar vein, our base case remains that [this year] the US and domestic economy can avoid a recession, but a slowdown appears likely," he said in a memo to clients.

Both the US Federal Reserve and the Reserve Bank of Australia (RBA) cut interest rates in 2019 after seeing their economies losing vigour.

"While the motives for cuts this year will be different, the market is now pricing cuts to the Fed and RBA after a fall in confidence in the global banking system," said Crookston.

"We believe some easing later in 2023 for the Fed, and late 2023 or early 2024 for the RBA is plausible."

Back to the future: How to position your 2023 portfolio

So if the current situation is so similar to three years ago, how has Wilsons positioned its portfolio?

According to Crookston, his team currently favours growth stocks.

"One of our key portfolio overweights is to growth, with a preference for non-cyclical growth such as healthcare, tech, and stocks like IDP Education Ltd (ASX: IEL) and Lotteries Corporation Ltd (ASX: TLC)," he said.

"We see these stocks, like in 2019, to be key beneficiaries of lower rates/bond yields and a slowdown in economic growth."

That doesn't mean cyclical growth won't also benefit from a cut in interest rates.

"Nine Entertainment Co Holdings Ltd (ASX: NEC) should benefit from lower rates and improving housing market sentiment owing to its 60% ownership of online housing classified Domain Holdings Australia Ltd (ASX: DHG)," said Crookston.

"Macquarie Group Ltd (ASX: MQG) and James Hardie industries PLC (ASX: JHX) will likely rerate when rates fall, while earnings prospects would improve on investment banking and US housing respectively."

The major difference between 2023 and 2019 is the current impact of high inflation.

Crookston warned that is a critical filter to apply when picking ASX growth shares at the moment.

"We believe the best defence against persistent cost inflation is pricing power," he said.

"High quality companies with resilient customer demand through the cycle and dominant market positions operating in attractive industry structures are best placed to protect their margins by raising prices."