Wealth Outlook 2023 | At a glance

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While global growth is set to worsen for some of 2023, we also expect markets to start focusing on the recovery that lies beyond. We believe the current conditions call for dynamic portfolios that are ready to pivot as a sequence of potential opportunities unfolds. This includes quality investments amid the present uncertainty and exposure to the sources of long-term growth.

Our expectations

• Global GDP growth: 1.7% in 2023, 2.3% in 2024
• Shallow recession in the US, worse in Europe and UK
• China to see recovery as COVID restrictions ease
• US inflation falls to 3.5% by end-2023 and 2.5% by end-2024
• Global earnings per share to fall 20% in 2023
• Fed to start cutting interest rates by second half of 2023
• Among the greatest risks to our outlook would be persistent 1970s-style inflation
• By contrast, the US might avoid recession if inflation drops faster than expected
• Other improbable risks include US-China military escalation or complete trade breakdown

Building dynamic portfolios

While our positioning is defensive as we enter 2023, we maintain a growth mindset and expect to pivot as a sequence of potential opportunities unfolds. We would like to highlight that the equity bear market is incomplete. Historically, a new bull market has never begun before a recession has even started. With that consideration, we consider the following when building dynamic portfolios:

• As interest rates peak, we expect to shift first to quality, growth equities in non-cyclical industries then cyclicals later on.
• Once dollar strength reverses, we see deep value potential in various non-US assets and currencies, such as income-producing real estate.
• Near-term, we emphasize quality, such as short-term US dollar investment grade fixed income.
• In equities, we look to defensive equities, including dividend growers.
• We continue to favor exposure to the drivers of long-term economic growth.

Putting cash to work in a higher interest rate environment

Rising rates and volatile markets unsettled investors in 2022. The new higher rate environment creates potential opportunities to seek income across asset classes.

Difficult market conditions in 2022 increased the temptation to sit on excess cash, but sitting on excess cash is a risky strategy, which almost always leads to missing out on recoveries. On the other hand, 2022’s turmoil has created more viable opportunities for putting cash to work. Our expectation is for interest rates to peak and inflation to fade over time. The possibilities for seeking yield do not include money market strategies.

Unstoppable trends are changing the world

Unstoppable trends are long-term phenomena that are transforming how we live and do business. 

1. G2 polarization intensifies

The US-China technology trade war increases the challenges facing investors, but it also creates portfolio diversification potential.

2. Greening the world: Energy security is vital

Fossil fuel energy dependence threatens economic growth and national security. We believe this strengthens the case for the clean energy transition and for positioning portfolios accordingly.

3. Deepening digitization

We highlight a range of attractive assets including semiconductors and robotics & automation, accessible via both public market and alternative strategies.

4. Seeking to boost portfolio

Aging populations and the expanding global middle class will likely boost healthcare demand long-term. Among our favored areas are biologics, life science tools, value-based care and agetech.