Investment Outlook 2023 – a fundamental reset

In our Investment Outlook 2023, we present an investment road map of what investors may expect with regard to the economy and the financial markets.

Investment road map for 2023

In hindsight, 2022 marks the year when geopolitics took center stage, not only significantly impacting the global economy and financial markets, but resetting international relations and global international commerce. This has implications for short-, medium-, and long-term growth, price prospects, and monetary and fiscal policy, potentially leading to sizeable shifts in the global monetary system with reverberations in financial markets.

This is a Financial Promotion.

Financial markets

As bond yields reset at higher levels, inflation peaks, and central banks stop rate hikes, emerging market hard currency sovereign bonds, US government bonds, investment grade corporate bonds, and selected yield curve steepening strategies look particularly interesting.

The contraction of equity market valuation is well advanced, but corporate profitability remains challenged by the weak macroeconomic backdrop and margin pressure. We expect these factors to create further headwinds and volatility going into 2023.

We prefer defensive sectors (e.g. our Supertrends Silver economy, Infrastructure, and Climate change), regions, and strategies with stable earnings, low leverage, and pricing power.

The USD should benefit from its interest rate advantage for most of 2023. As a result, we expect it to stay strong, particularly versus emerging market currencies.

We expect hedge funds to deliver above-​average returns. The 2023 vintage year is likely to be a good one for private markets, with secondaries and private debt doing well. In real estate, we prefer listed over direct solutions.

As bond yields have reset at higher levels, fixed income as an asset class has gained relative attractiveness compared to equities. Diversification benefits should return as central banks stop hiking rates.


As inflation peaks and eventually starts to decline, central banks will likely stop hiking rates in Q1/Q2 2023. However, we do not expect any rate cuts in 2023 because inflation will remain above central bank targets.

Global growth is decelerating and, with monetary policy reaching restrictive territory, we believe that it will generally stay weak in 2023.

Public support measures to combat the cost-​of-living crisis and increasing defense spending mean budget deficits remain high. As borrowing costs remain elevated, governments are likely to increase taxes to finance spending.

As the world becomes more multipolar, given the emergence of various political spheres of influence, we expect global trade as a share of GDP to decline and the repatriation of strategic sectors to continue.

Out with the old monetary regime

The year 2022 marked the end of "lowflation," a side effect of globalization. Indeed, COVID-related disruptions of global supply chains, more decisive climate policy action as well as a full-fledged energy crisis and a food price shock in the wake of the Ukraine war led to a new regime of elevated inflation.


Not only did volatile energy and food prices drive up headline inflation, but wage increases also allowed less volatile price categories like travel, hospitality, and medical services to rise, lifting core inflation to multi-decade highs.


Although we believe inflation has peaked in most countries as a result of decisive monetary policy action, central banks are signaling that they need to hike rates further to reduce demand and create slack in labor markets.


Although we expect the pace of tightening to peak by the end of 2022, we do not forecast any developed market central banks to cut interest rates in 2023.

Growth outlook dims

More monetary tightening, rising real yields, energy price shocks in Europe, China's ongoing property market downturn, and COVID-19 lockdowns have led us to cut our forecasts for GDP growth across the board. We now expect the euro zone and the UK to have entered a recession in Q4 2022, and China to be in a growth recession. These economies should bottom out by mid-2023 and begin a weak, tentative recovery – a scenario that rests on the crucial assumption that the United States manages to avoid a recession.


The geopolitical events of 2022 have increased the risk that climate action may be uncoordinated across regions and even possibly postponed, making it less effective. In a disorderly climate transition, the negative supply shock will ultimately be larger, leading to higher inflation and lower growth in the medium term, accompanied by bouts of volatility as climate policy arbitrarily evolves across regions. This amplifies our expectations of a new macro regime with elevated inflation and lower potential growth.

Connect with our experts to learn more about the Investment Outlook 2023.

To the extent that these materials contain statements about the future, such statements are forward looking and are subject to a number of risks and uncertainties and are not a guarantee of future results/performance.