Citi Global Wealth overview | | 15 Investments A possible path through: FiGUre 7. oUr PoTeNTiAL “GLiDe PATH” For 2023 opportunities now, THE GLIDE PATH THROUGH 2023 opportunities later In the year of challenges and change that we expect, we see various potential opportunities for investors. A sharp fall in valuations across FEDERAL RESERVE FED HALTS MARKET ANTICIPATES ECONOMY many markets have driven up our ten-year RAISES RATES TO RATE RISES RECOVERY BOTTOMS strategic return estimates – see The brighter 4.75-5.0% (AND EVENTUALLY CUTS) long-term outlook for asset classes. On a tactical view, the opportunities may present themselves in a sequence, some sooner and others later. In early 2022, rapidly rising interest rates created uncertainty for valuing any financial asset. The rough doubling in POSITIVE EMPLOYMENT US AND GLOBAL government bond yields over the past year has TURNS TO NEGATIVE RECESSION UNDER- THE DOLLAR boosted higher quality fixed income yields to EMPLOYMENT WAY BEGINS TO FALL a more appropriate level for the first time in several years. Given a slowing cyclical backdrop, we see a stronger potential opportunity for fixed income assets within overall portfolio construction and to earn income on excess cash – see Pursuing portfolio income with short- term bonds. In the environment we expect, US 10-year Treasury yields may end 2023 at 3.0%. Heading into 2023, we believe defensive equities may perform best near term and we remain Source: CGWI Office of the Chief Investment Strategist, as of October 11, 2022. All forecasts are expressions of opinion, are subject to change overweight US dollar assets. By contrast, we without notice, and are not intended to be a guarantee of future events. Indices are unmanaged. An investor cannot invest directly in an index. remain cautious on Europe and Japan. However, we note that most non-US equities’ poor performance in 2022 was owing to collapsing local currencies rather than local returns falling. This may start correcting in 2023 as peak fear and peak policy divergence with the US sets in – FIGURE 8.