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Global economy Investment roadmap 2023 22 | 23 The fixed income renaissance As bond yields reset at higher levels, inflation peaks, Trends to watch and central banks stop rate hikes, fixed income returns look more attractive. Emerging market hard currency sovereign bonds, US government bonds, investment grade corporate bonds and selected yield curve steepening strategies look particularly interesting. Equity markets remain volatile An end to rate hikes as inflation peaks Contraction of equity markets’ valuation is well As inflation peaks and eventually starts to decline, advanced, though challenged corporate profitability central banks will stop hiking rates in Q1/Q2 2023. from the weak economic backdrop and margin However, we do not expect rate cuts in 2023 pressure should still lead to headwinds and volatility because inflation will remain above central bank going into 2023. We prefer defensive sectors, targets. regions and strategies with stable earnings, low leverage and pricing power, such as Swiss equities, healthcare and quality stocks. Defensive Super- trends such as Silver economy, Infrastructure and Climate change should also prove less volatile. Growth set to stay low Global growth is decelerating, and with monetary policy reaching restrictive territory, we believe that it will generally stay weak in 2023. ts USD seen staying strong The USD should be supported by its interest rate e advantage for most of 2023. As a result, we expect the USD to stay strong, particularly versus emerging Fiscal challenges ahead market currencies such as the CNY. However, some Public support measures to combat the cost-of-living developed market currencies such as the JPY are crisis and increasing defense spending mean budget now undervalued and could stage a turnaround and deficits will stay high. As borrowing costs remain appreciate at some point. elevated, governments are likely to increase taxes to finance spending. A good year for most alternative investments Hedge funds should deliver above-average returns, Globalization dialed back and 2023 is also likely to be a good vintage year for As the world becomes more multipolar with the private equity. Secondaries and private debt should emergence of various political spheres of influence, do well. In real estate, we prefer listed over direct we expect global trade as a share of GDP to decline solutions. and strategic sectors to be repatriated. conomics Multi-asset diversification returns As bond yields have reset at higher levels, fixed E Financial mark income as an asset class has gained relative attractiveness compared to equities. Diversification benefits should return as central banks stop hiking rates.

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