“Global slowdown amid still elevated inflation to characterize most part of 2023.”
The economic backdrop foreseen for the next 12 months suggests that the ongoing correction will continue through the first half of 2023, featuring a profits recession and still elevated (albeit moderating) inflation. In H2 some of the headwinds should abate (with lower price pressures and the Fed on hold), supporting a gradual shift from the current defensive stance (with its tilt towards gold, investment grade credit and, marginally, government bonds) to increased risk exposure (mainly via DM equity and high-quality credit).
In 2023, the business cycle will be shaped primarily by two interconnected factors: a significant global slowdown, featuring still above-target inflation – and its fallout on monetary policy - and the resulting profits recession. Growth is expected to decelerate across developed markets (DMs), ranging from sub-par levels in the United States to a few quarters of contraction in the Eurozone and United Kingdom. The cost-of-living crisis generated by the exceptionally fast pace of increase in global inflation experienced over the past 18 months and its persistence into 2023 – albeit at a slowing pace – will hit both consumer spending and sentiment severely.
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