2023 Multi-Asset Midyear Outlook: Rounding the Corner

As economic conditions improve, multi-asset investors may see better equities opportunities, alongside compelling income generation.

Over the past 18 months, high inflation drove rapid monetary policy tightening, which weighed heavily on consumer spending power and corporate margins. As inflationary pressures now abate, we see eventual improvement in both real incomes and profits, which should enhance prospects for multi-asset investors.

Falling inflation and a coming end to rate hikes create a favorable environment for risk assets. And with interest-rate cuts likely over the next year, income seekers could continue to benefit from historically high bond yields.

Growth Picture Improves, with Goods and Housing Looking Up

Global economic growth has weathered not just the most aggressive tightening policies in decades but also a resulting dark patch of banking stress.

Strong labor markets, healthy consumer balance sheets and pent-up demand for services have underpinned resilient consumption. While job creation is likely to slow, improving real incomes could support continued growth. The goods sector is also recovering from a destocking cycle, and we expect modest improvement ahead. Even housing, which has been a significant drag, has started to stabilize.

Two indicators, in particular, suggest that the climate is warming to risk assets. First, manufacturing and services may have bottomed across major economies (Display, left), while earnings revisions are up from recent lows and near historical averages, partly due to easing margin headwinds (Display, right).

Output and Earnings Show Resilient Growth