Global Private Banking Investment Outlook Report Opportunities Amid High Rates and Slowing Growth The set of themes under our second American Resilience: The US economy staples, as consumers trade down to trend balance the attraction of is growing at below-normal speed, lower cost goods, but keep spending. improved valuations in equities but it still remains more resilient than Durable Dividends: Dividends can and bonds against the current other economies. Key to this is the fact substantially add to total returns, deterioration of the cyclical that it is an energy exporter, so we see especially when the potential for momentum and the high level of opportunities in oil and gas. Many US sustained upside in equity markets is uncertainty. They also act as a households managed to save during the limited. Of course, as the cycle slows, counter-weight to many of our pandemic and unemployment remains it is important to select companies that other themes, which typically have very low. So while we have been shifting have sufficiently strong cash flows to a growth-style bias and follow out of discretionary consumer goods and pay out constant or growing dividends. longer-term trends. We recognise services, we see support for consumer But dividend expectations have been there is some overlap between the themes we discuss below, but by Consumers have seen their mortgage payments and inflation jump, and this combining some of the ideas, all is weighing heavily on their confidence. focused on quality and/or cyclical defensiveness, investors can find Inflation Mortgage rate Consumer confidence (RHS tangible ways to help compose a 10 120 defensive portfolio with reasonable return potential. 8 100 6 Our six high conviction themes 80 4 1. American Resilience % 60 2. Durable Dividends 2 3. Recession Survivors 40 0 4. Hedging Against Inflation 20 5. Short-to-Medium Dated -2 Quality Credit -4 0 6. DM Financials – Moving Up the 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 Capital Structure Source: Bloomberg, HSBC Global Private Banking as at 22 November 2022 18