These factors, coupled with improved valuations, should, according to the economist, result in better returns for investors this year.
However, Dr Oliver warned that bumps in the road are likely, particularly with regards to interest rates, recession risks, geopolitical risks and raising the US debt ceiling around mid-year.
Dr Oliver predicted global shares will return around 7 per cent in 2023, with US shares remaining a relative underperformer compared to non-US shares due to higher price-to-earnings multiples.
The US election year is usually associated with above-average gains in US shares, but Dr Oliver believes that the $US will weaken, which should benefit emerging and Asian shares.
Australian shares, however, are expected to outperform again.
“[They will be] helped by stronger economic growth than in other developed countries and ultimately stronger growth in China supporting commodity prices and as investors continue to like the grossed-up dividend yield of around 5.5 per cent,” Dr Oliver said.
“Expect the ASX 200 to end 2023 at around 7,600,” he added.
Turning to bonds, Dr Oliver said they would likely provide returns slightly above running yields as inflation slows and central banks become less hawkish.
Moreover, he predicted that unlisted commercial property and infrastructure would see slower returns due to the lagged impact of weaker share markets and last year’s rise in bond yields.
Moving on to Australian home prices, he said they are likely to fall another 8 per cent as rate hikes continue to impact, resulting in a top to bottom fall of 15 to 20 per cent.
However, Dr Oliver tipped that prices would bottom around the September quarter, ahead of gains late in the year as the Reserve Bank moves toward rate cuts.
Cash and bank deposits are expected to provide returns of around 3.25 per cent, reflecting the backup in interest rates through 2022, Dr Oliver added.
Finally, he predicted the Australian dollar will trend upwards over the next 12 months, reflecting a downtrend in the overvalued US dollar, the US Federal Reserve System moving to cut rates, and solid commodity prices helped by stronger Chinese growth.
Overall, according to his predictions, investors can expect a mixed bag of returns in 2023, with Australian shares and global shares providing some opportunities for gains, but with potential risks and bumps along the way.
