Global Investment Outlook 2023

Parallel Worlds

We’ve entitled the outlook “Parallel Worlds”. Our motivation for using this phrase is to reflect some different realities which confront investors in 2023 – that is to say, different economic trends in different parts of the world, a different economic environment versus what we have become accustomed to in the 2010s, and some big and important shifts in market valuations, which we think really change the game for investors.

If 2022 was a year of the inflation surge, rising rates and falling equity market multiples, we think 2023 is going to be a year about the macro cycle.

During 2022, we have faced “a global poly-crisis”. Geopolitical uncertainties, a China growth slowdown, stagflation, the climate crisis, financial instability and recession risks all had an impact on markets, individually and collectively.

As part of our “parallel worlds” theme, we state that cyclically, the world economy is in different situations. It should create some relative-value opportunities for global investors in 2023.

Read the full 2023 Investment Outlook

Portfolio dynamism

The capital market line (representing an optimal combination of risk and return) has shifted upwards

The regime of “no alternative to equities” is over

Credit indexes now deliver yield

Short-duration bonds are the ‘natural assets’ in the current economic phase

Active in emerging markets

In a turbulent world, market price dispersion remains high

Valuations, a peaking US dollar and China policy support creates opportunities for emerging markets in 2023

History highlights criticality of being active in Asia

Country allocations as a source of alpha and diversification

New diversifiers

The hunt for new diversifiers has intensified

More-defensive allocations make sense (e.g. infrastructure, REITS)

True-uncorrelated asset classes remain attractive (Natural capital, hedge funds)

The investment case for private equity is about alpha, not beta