Luca Paolini, Chief Strategist and Arun Sai, Stratégiste Senior Multi Asset Strategist Pictet Asset

Management.

Overview: caution with a side order of optimism

2023 will be a year when the investment environment slowly gets back to normality. Inflation will come down – even if not quite as fast as the market seems to expect. Economies will struggle for growth, but manage to stave off a deep downturn.

Equities are set to tread water, but fundamentals will suit high quality bonds. Meanwhile, emerging market assets, particularly local currency debt, are set to shine amid a weakening dollar and a revival in the Chinese economy.

The global slowdown – a number of indicators suggest various leading economies might already be in recession – has been the most anticipated one in living memory. Central banks have responded to this year’s surge in inflation by putting on the brakes, and that’s filtering through to their economies. As a result, global annualised quarterly real GDP growth is set to run at below potential through to at least the final three months of 2023.