Some of the world’s top money managers, expectant that inflation has peaked and the Federal Reserve will reverse course on interest rates, think stocks will rise an average of 10% next year.

This is according to a Bloomberg News survey of 134 fund managers, including Goldman Sachs and BlackRock, conducted Nov. 29 to Dec. 7.

The institutional money managers believe most of the stock market’s gains will occur in the second half of the year, and hold out optimistic views on recession-proof sectors—including dividend payers, insurance, health care and banks.

Their picks also include emerging markets—including India, Indonesia and Vietnam—and China, on prospects its COVID lockdowns will ease. Beaten-down technology stocks are also in their favor, due to relatively cheap valuations on such Big Tech giants as Apple Inc. (AAPL), Amazon.com Inc. (AMZN) and Google parent Alphabet Inc. (GOOG).

A recession is still a realistic possibility, the managers hedge, as is inflation remaining high. Forty-eight percent expect a recession to occur in the next 12 months, and 45% think inflation will persist.

“Even though we might face a recession and falling profits, we have already discounted part of it in 2022,” says Pia Haak, chief investment officer at Swedbank Robur. “We will have better visibility coming into 2023, and this will, hopefully, help markets.”

Asset managers are concerned how the energy crisis in Europe will play out this winter, but are hopeful the Ukraine war will end.

Some think stagflation could occur in the U.S., whereby inflation is further complicated by high unemployment, leading to an economic slowdown.

But like their recessionary stock picks, the money managers see a silver lining in the challenges ahead.

Says Fabiana Fedeli, chief investment officer for equities, multi-asset and sustainability at M&G: “The outlook from here onward will be influenced by the probability, depth and longevity of recession. There are still pockets of opportunity where companies with strong fundamentals that are able to weather the storm, get sold off in times of market panic.”

Shoqat Bunglawala, head of multi-asset solutions for EMEA and Asia Pacific at Goldman Sachs Asset Management, is taking a wait-and-see approach: “A sustained rally in risk assets isn’t likely until inflation is more firmly downward trending toward target.”

A bit more pessimistic, Ben Powell, chief investment strategist for APA at BlackRock Investment Institute, says: “We’ve had the lightning of policy tightening in 2022, and now the thunder will follow—that is to say, the damage.”