Inflation is decelerating but remains sticky and elevated, so inflation mitigation via infrastructure remains crucial for investors. By contrast, the slowing growth outlook will further depress commodities and natural resources.
Alternatives provide important diversification against traditional equities and fixed income.
While higher-quality bonds will likely outperform and provide important diversification benefits, the mild recovery implies high yield (HY) defaults may not spike significantly, and elevated HY yields could provide a decent cushion as spreads widen.
High-quality fixed income offers stability and income in this unfolding economic backdrop.
Notably, as a U.S. recession will likely be short and shallow, any equity pullback will likely be short and shallow. The following recovery will likely be reasonably swift, requiring a nimble and active response from investors.
Equities will come under pressure as earnings weaken and further rate hikes test valuations.
Stubborn core inflation has led to a repricing of central bank rate hikes, with further hikes to come in most DM economies, including the Federal Reserve (Fed). Inflation caution also implies that rate cuts will not start in 2023.
Most central banks are not done with monetary tightening; rate cuts off the agenda in DM.
Headline inflation is falling rapidly, but core inflation is proving to be a worry in developed markets (DM). Slower economic growth will be required to reach global central bank inflation targets. By contrast, emerging market (EM) inflation has fallen below DM inflation.
Inflation is decelerating, but at a slow pace, and will end the year meaningfully above target.
While manufacturing has struggled, global growth has been supported by the services sector. Despite resilient U.S. growth, the foundations have been laid for a short and shallow recession later this year.
Europe is weakening, China is disappointing, and the U.S. is approaching recession.
Click the arrows to scroll through the key themes.
Key themes
3Q 2023
Global Asset Allocation Viewpoints
Time is running out.
Get our perspective
Read our perspectives regarding recent developments impacting global markets.
Further concerns, or crisis
02
02
03
04
05
06
01
03
05
04
06