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Global Private Banking inflation, which we think will continue to difficult. In addition, the lag with which question the sustainability revolution. ease, and may surprise to the downside. all the rates hikes we’ve seen around We don’t think this is the case: On the other hand, though, there are the world will affect inflation and households and companies have reacted plenty of sticky inflation items, related growth, is highly uncertain, creating to the war by installing more solar to rents (which lag house prices) and the risk of policy error (too little or too panels, insulating their houses better and services, propped up by a still strong much tightening). Political topics are trying to reduce energy consumption, labour market. So while inflation should key too: China’s COVID policy is closely while governments have also invested in come down in 2023, it is unlikely to get watched by markets, the outlook of the renewable energy and nuclear. COP27 anywhere near the typical 2% central Russia-Ukraine war is unpredictable and COP15 have illustrated that climate bank targets. That means that central but has big implications, and the policy change and biodiversity are impacting banks are not yet done with their rate gridlock in the US congress could lead each other, and addressing the cause hikes, and many will want to keep their to challenges around the debt ceiling. of either also tends to help address the rates in restrictive territory to ensure We’re also seeing a rise in insolvencies other challenge. Much more needs to the inflation dragon is really slain. of some smaller and weaker corporates be done urgently, and the effort needs In the case of the US Federal Reserve, as a result of higher rates, higher input to be sustained, if we want a chance we think rates will go to 5% in Q1 and and labour costs though not a credit to hit the 1.5C target. We think the then stay around that level through crisis (due to the careful management of structural support for sustainability 2023 and 2024. leverage by households and corporates themes is enhanced by the short term In summary, we expect a fundamental in recent years). Finally, the hawkish tone need to save on costly energy, fertilisers, market backdrop of slowing global of the ECB, coupled with the new Italian packaging, transport etc. Among other growth, while rates continue to rise for government, may test investors’ nerves structural trends, we think the much now, and plateau later (China is a notable in the Eurozone’s periphery. debated de-globalisation and US-China exception, as its growth is slow but Amid this uncertainty, luckily, there strategic competition leads to supply finding a bottom, and Chinese rates are are some structural trends that remain chain diversification, re-onshoring and relatively stable). in place and give investors some long nearshoring, benefiting Mexico, our But a big issue for investors is that term direction. Some commentators Total Security and ASEAN Tigers there are huge uncertainties around are wondering whether the Russia- themes. We discuss the long term this outlook. The many components Ukraine war, which has caused some trends more in our chapter on High entering into CPI create a confusing governments to drill for more oil and Conviction (HiCo) Themes. picture and make accurate forecasts gas to secure energy supplies, puts into 7

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