Foreword The impact of the events of the past year will be felt long into the next one, particularly the tragic consequences of the Ukraine war. Chief among them from a financial perspective is the shift in monetary regime, from one supportive of global markets to one with a focus on taming inflation. This is challenging the outlook for assets and global economic growth and has led to both the ongoing volatility that has been a feature of 2022 and increasingly tight liquidity conditions. Central banks have outlined their concerns about supply side pressures that could embed inflation into economic systems and lead to rising wages and prices. As they tighten financial conditions in response, the risk of a hard landing is increased, and could play out as an economic contraction and labour market weakness. For equities this will be expressed in lower corporate earnings, while in debt markets we are watchful for rising default rates and downgrades. Other risks, including geopolitical uncertainty and a gradual decoupling of large economies from globalised supply and cooperation networks, may exacerbate the challenges facing asset markets in 2023. Meanwhile, consumer spending is at risk of a sharp decline as households battle a combination of higher energy and debt servicing costs. However, there are signs that some of the pressures of 2022 may ease into 2023, particularly in terms of supply chain disruption and transport. Prices for air, sea, and land freight are falling and the backlogs created by Covid lockdowns are easing, which may help to soften the blow on consumption. The gradual removal of quarantine restrictions globally has boosted investor confidence, with China now the only major economy where significant requirements are still in place. Further relaxation there would remove a distinct hurdle for both China and the global economy. With so many factors in play, and many of these pointing to increased downside risk, we maintain a cautious outlook in preparation for the next 12 months of uncertainty, whilst always being mindful that markets are forward-looking and sentiment will rise before the data shows the economy to be on an improving track. Anne Richards CEO, Fidelity International 2 Investment Outlook Fidelity International