While the overall investment outlook is gloomy, Deglobalisation there are several themes that could provide the We expect the structural theme of deglobalisation catalyst for sentiment to improve. and re-shoring to continue in 2023. China is going First, signs that hard US data is moderating could through a transition phase, and we believe the be a harbinger of the much-feted Fed pivot. gradual bifurcation of China and the West will Although we do not expect it soon, when it does continue. While this may be a drag on China, arrive, it should boost risky assets such as equities the reconfiguring of supply chains will provide and credit, as well as government bonds. opportunities for other countries too, especially Chart 2: Job market and wages have peaked Mexico and Canada, but also some Latin American but remain strong economies and Thailand and Vietnam. 7.5 2.4 Less correlated exposures will be an 5.0 1.6 important part of the investment arsenal 2.5 0.8 Of course, the first rule of multi asset investment is to understand the difference between asset 0.0 0 behaviour over the long and the short term. 2005 2010 2015 2020 Over a longer time horizon, we see no reason Atlanta Fed wage growth tracker smoothed for undue pessimism. Economies will survive Atlanta Fed pre-Covid average Ratio of job vacancies to job seekers (RHS) this particular bout of challenges and doubtless Average pre-Covid ratio (RHS) emerge stronger when they do. As long-term Source: Refinitiv, Fidelity International, October 2021. investors, it is important not to lose sight of the big picture, but to be alert to opportunities Second, any relief for European consumers, along the way, with the aim of both capturing either by an unexpected end to the war or a short-term upside and mitigating downside. comprehensive fiscal support package would In 2023 and beyond, we believe multi asset improve the region’s outlook. investors must make use of as broad a toolkit as Third, any indication that Chinese authorities are possible. From liquid absolute return strategies prepared to relax strict Covid rules or refocus on (aiming for positive, uncorrelated returns) to growth and away from reform would be taken listed alternatives (including infrastructure and very positively by markets. renewables) to private assets (including private Lastly, we will be watching guidance from the Bank equity, private credit and real estate), less- of Japan closely for any indication they are ready correlated exposures will be an important part to step away from yield curve control. This would of the investment arsenal. Indeed, the coming stem the yen’s devaluation and could potentially years and their challenges call for wider sources push global government bond yields higher. of diversification and risk, where investors will be forced to look beyond traditional assets to deliver outcomes over the long term. 10 Investment Outlook Fidelity International