Cyclical Outlook Key Takeaways: Strained Markets, Strong Bonds
After enduring one of the worst years on record across asset classes, investors should find more cause for optimism in 2023, even as the global economy faces challenges.
In our latest Cyclical Outlook, “Strained Markets, Strong Bonds,” we discuss how we are investing against a backdrop of a likely recession as central banks continue to battle inflation. This blog post summarizes our views over the next six to 12 months.
The economic backdrop
Economic activity has been more resilient than expected, but the outlook has deteriorated. Financial conditions have tightened, and our baseline view is for modest recessions across developed markets (DM).
We see three key economic themes:
- Inflation is likely to moderate, and risks to the inflation outlook appear more balanced than they did several months ago.
- Central banks are closer to holding policy at restrictive levels as opposed to getting policy there.
- Shallow recessions won’t be painless, as unemployment is likely to rise.