Key Insights

The global economy has avoided recession so far, but now must confront severe challenges.
Strains are building, and the U.S. will likely enter recession in the second half of 2023. By then, Europe will likely be emerging from recession, while China and Emerging Asia may be enjoying a COVID-reopening-inspired recovery.
Inflation is slowing only gradually and will remain above target in 2023, despite recession.
Segments of the inflation basket will soften rapidly, but tight labor markets and strong wage pressures imply that core segments of inflation will remain uncomfortably elevated, resulting in an incomplete disinflation process.
Central banks will hike further this year and will not provide any relief.
Major central banks have now decelerated their tightening, but this isn’t a precursor to a less hawkish stance. The stubborn inflation story means that policy rates are rising further and will not be cut, even as recession takes hold.
First rate hikes, now earnings weakness: Equity markets face further challenges this year.
The struggling macro backdrop signals a meaningful fall in earnings that is unaccounted for by markets—a headwind that will, inevitably, further extend the equity market drawdown.
Fixed income, once again, can offer stability and income in a challenging economic backdrop.
Central banks are likely nearing the completion of their tightening cycle, implying that bonds will be able to support portfolios both as recession approaches and during forthcoming periods of volatility and risk.
The stubborn inflation picture implies that real assets outperformance is not yet exhausted.
Their diversification benefits and defensive characteristics in this macro environment are particularly valuable, as the stubbornly high inflation backdrop should extend outperformance in commodities and infrastructure.

Webcast replay

Recorded October 12, 2022

What should investors expect from markets and the economy in the fourth quarter and beyond? Listen as Seema Shah, Chief Global Strategist and Todd Jablonski, Chief Investment Officer & Head of Asset Allocation share their perspectives including key investment themes and asset allocation preferences.