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Multi asset Henk-Jan Rikkerink Global Head of Solutions and Multi Asset Defensive for now until volatility subsides Global asset markets face no shortage of headwinds as we look ahead to 2023. As the Federal Reserve attempts to get a grip of soaring inflation in the US, the dollar’s rapid appreciation has sucked capital away from other regions. Europe and the UK are in the middle of an energy crisis, with no clear endpoint for the devastating Russia-Ukraine war. Inflation remains high across most global regions, consumer confidence is at rock bottom, and China’s economy is stuck in first gear. This multitude of challenges paints a complicated investment backdrop heading into next year, and we expect volatility to remain high for some time. We believe defensive positioning will remain not reflected in earnings forecasts or valuations, important for investors going into 2023. Cash and implying there could be further downside to come. uncorrelated assets will form a key component of multi We expect volatility to remain high, and sentiment asset portfolios until volatility subsides. Government is low enough that sharp risk-on bounces will be bonds are also likely to have a role to play, especially likely, if short-lived. Earnings estimates for 2022 have now that yields are much more attractive. If 2023 gradually declined as the year has progressed, brings a hard landing, as we believe it will, central but estimates for 2023 have barely budged, an banks should ease off hiking rates as growth slows. anomaly given the challenging outlook for the The structural tailwinds that drove the bond rally over coming year. Valuations have fallen somewhat; the last 40 years may have diminished somewhat, pockets of real value are emerging. However, many but government bonds are still the go-to asset for markets are a long way from what we might call portfolio diversification in a recession. ‘cheap’ compared to history. Deteriorating environment not yet Potential catalysts for sentiment to reflected in equities pick up The time will come to allocate back into equities As we move into 2023, we are focused on too. But for now, the deteriorating environment is finding pockets of growth in a low growth world. 9 Investment Outlook Fidelity International

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