Investors found few places to hide in 2022. Both major asset classes: stocks and bonds, fell significantly globally. But if analysts are correct, 2023 will be the year of the corporate bond boom.

Blue chip corporate debt had its worst year after on record. Despite a year-end recovery, the value of corporate debt fell globally in 2022 by $2.6 trillion, or nearly 17%. By comparison, the shares fell 13.7%.

The main argument for predicting a bond rally is that debt looks more attractive than equities. The fall of 2022 means investors can buy bonds at very favorable prices compared to last year’s values. The average low-risk corporate bond is valued at around 90 cents on the dollar. Less than two years ago, they traded at 110 cents to the dollar.

The second argument is the economic context. The prospect of a recession means lower corporate earnings, which darkens the outlook for equities. And if the downturn pushes the riskiest companies out of business, shareholders could lose everything, while bondholders usually get back at least some of their investment.

The main risk of this scenario is that inflation persists, and the FED continues to raise rates. We would end up in a configuration identical to 2022, with equity and bond markets simultaneously falling.

December 2022 was the worst month in corporate bond emissions for at least 15 years. But at this stage, optimism is the new norm. Companies are poised to take advantage of the increased demand for debt, with as much as $58 billion in US bond sales made in the first week of January. The end of cheap money also means that the safest companies now generate higher yields than junk bonds at the start of last year, allowing investors to earn decent returns while avoiding riskier assets.