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The views expressed are those of the authors at the time of writing. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional, institutional, or accredited investors only.
2023 Mid-year Global Economic Outlook
While the market currently is priced for continued cyclical convergence — a pattern that has dominated the past 30 years — Macro Strategist John Butler believes that macroeconomic cycles are instead likely to diverge and be more frequent and compressed. Macro Strategist Juhi Dhawan observes that currently unemployment is low and inflation high in the US but believes that the picture could look different by the end of the year. For Europe, Macro Strategist Eoin O’Callaghan says the key questions are whether and for how long the euro-area cycle and monetary policy will diverge from the US. Macro Strategist Santiago Millán anticipates continued growth across Asia, with China as the pivot. As in 2022, he believes that developing Asia will be a key beneficiary of this trend.
2023 Mid-year Bond Market Outlook
Amid persistent inflation, higher policy interest rates, and other macro headwinds, Fixed Income Strategist Amar Reganti urges fixed income investors to stay flexible, nimble, and opportunistic. Fixed Income Portfolio Manager Rob Burn likewise argues for a relatively defensive credit risk posture and above-average liquidity profile but sees better entry points for allocators to take on additional credit risk in the second half of the year in select sectors.
Fixed Income Portfolio Manager Brij Khurana believes that market participants and central banks have a misplaced faith in the ability of markets to predict economic cycles. With recession risk looming larger in the macro picture, Fixed Income Portfolio Manager Konstantin Leidman says that high-yield bond investors should expect deteriorating fundamentals but not a full-on default cycle. Portfolio Manager Brian Garvey points to a quiet bull market taking place in EM local debt and is optimistic that this could prove to be a longer-term trend.
What’s next...
2023 Mid-year Alternative Investment Outlook
While there is no shortage of questions and uncertainty about the direction of the economic cycle and markets, Multi-Asset Strategists Adam Berger and Nick Samouilhan briefly explore alternative investment ideas that they think could help lessen the importance of the cycle: Double down on diversification, seek equity substitutes, take advantage of volatility, tap into credit opportunities, and get more from your core equity with active extension strategies.
While stubborn inflation rates and recent regional bank failures represent challenges to venture capital markets, Co-Head of Private Investments Michael Carmen believes that other factors point to 2023 as a potentially strong vintage year for venture capital firms that can navigate volatility.
Looking ahead to the second half of 2023, members of our private credit team — Ryan Lewis, Emeka Onukwugha, and Elisabeth Perenick — see enduring opportunities fueled by the changing macroeconomic regime, the ongoing banking crisis, and an evolving competitive landscape.
2023 Mid-year Equity Market Outlook
Equity Strategist Andy Heiskell argues that prudent equity allocators ought to prepare themselves for greater volatility, more frequent market cycles, and higher inflation going forward. He then explores ideas that could take advantage of dispersion among countries and sectors, volatility in fundamentals and asset prices, and increasing market breadth.
Looking ahead to 2024, Equity Portfolio Manager Bo Meunier has a constructive outlook for equities in China despite mixed economic data. While she is optimistic on the prospects for the technology and health care sectors, she explains that continued challenges in the property market and a slow recovery in the job market are among the factors currently holding equities back in China.
Macro Strategist Nicolas Wylenzek believes that European equities are in the best structural position they have been in for years. In addition to being attractively valued relative to other regions, he cites the following factors as reason for optimism: European policymakers have changed their attitude toward fiscal spending, the region has returned to a positive interest-rate regime, and European equities have significant exposure to the energy transition supercycle.