Executive summary
- We are more positive on risk assets, dominated by our favourable assessment for equities across Developed Markets, China, and Asia, along with Asian Investment Grade and High Yield corporate credit, as well as energy commodities.
- The bottoming process for global equities seems to have gained greater traction.
- The signposts for a more positive investment view have been triggered – US disinflation is unfolding, Fed peak rates may be near, China has relaxed its tight Covid control policies, and China’s property sector appears to be bottoming.
- We believe monetary conditions, as signalled by the US Fed in December 2022, may finally be tight enough to continue to bring inflation down.
- There are emerging opportunities in this ‘New World Order’ amid the unfolding of the ‘3G’ forces of a Great Decoupling, a Great Volatility, and a Great Reset.
- Countries that are best able to drive inflation lower may avoid sharp rises in yields, face less employment destruction, and potentially enjoy more favourable earnings growth and equity returns.
- China, the key driver of Asia, is one of the few countries where inflation is low and growth is expected to be significantly stronger in 2023.
- The consensus view and that of the Fed is that the US can achieve a shallow or ‘growth rate’ recession. With US equities having fallen significantly over 2022, some degree of recession risk may be priced-in. If a ‘growth rate recession’ in place of a ‘hard landing’ can be realised, there could be some upside for US equities
You may also hear from our Strategist, Robert St Clair, who highlights the opportunities to pursue, and the investment trends that will shape 2023 and beyond in this ‘New World Order’.