Economic Growth
Relative to beaten-down expectations, global growth will surprise on the upside in 2023. Investors should overweight equities for now but look to turn more defensive in the second half of the year.
In Section I, we note that the global growth outlook has modestly deteriorated over the past month, despite an improving 12-month outlook for Chinese domestic demand in response to the imminent end of the nation’s “dynamic zero-COVID” policy. Investors should remain conservatively positioned over the coming year, as we recommended in our Annual Outlook report. In Section II, we examine whether the structural risks facing global stocks are higher or lower today than they were prior to the global financial crisis, and what that implies for stock and bond risk premia.
In this, our final report of a tumultuous year, we summarize our policy outlook for the “Big 4” central banks – the Fed, the ECB, the Bank of England (BoE) and the BoJ – and the associated bond market implications for 2023.
This week we present our outlook for the Fed in 2023.
Investors were heartened by the November CPI report, but the Fed said not so fast. Although it snuffed out the latest mini-rally, ongoing disinflation will set the stage for another one early next year.
We explore the eight major themes that will define economic and market trends for Europe next year.
Prefer government bonds over stocks, defensive sectors over cyclicals, and large caps over small caps. Favor North America over other markets. Favor emerging markets like Southeast Asia and Latin America over Greater China, Turkey, and emerging Europe. Stick with aerospace/defense stocks.
Prefer government bonds over stocks, defensive sectors over cyclicals, and large caps over small caps. Favor North America over other markets. Favor emerging markets like Southeast Asia and Latin America over Greater China, Turkey, and emerging Europe. Stick with aerospace/defense stocks.
In this report, we discuss our most important investment themes for global fixed income markets in 2023, and present our main investment recommendations based on those themes. Our broad conclusion: an environment of slowing global inflation, much weaker global growth and less hawkish central banks will be positive for global government bond returns, but problematic for growth-focused spread products like corporate bonds.