8 | 2023 Investment Outlook | December 12, 2022 ƒ It’s worth stressing that the most important variable looking forward is what inflation will be over the medium term. We believe that inflation will continue to come down consistent with a slowdown in demand as the U.S. economy weakens, and improvements in various supply side constraints. However, if inflation surprises on the upside and prompts the Fed to be more aggressive, fixed income broadly will have another poor year. ƒ Our view is that the Fed will moderate its increases. Policymakers have begun to note that monetary policy operates with “long and variable lags.” We view this as dovish messaging that the Fed is closer to its pivot. It also implies that the Fed has done far more in 2022 than anyone would have expected at the end of 2021. In sum, fixed income markets are like to be driven in 2023 by a less aggressive Fed and a slowing economy. “The Fed did far more in 2022 than anyone would have expected at the end of 2021.” Risk Considerations: An imbalance in supply and demand in the income market may result in valuation uncertainties and greater volatility, less liquidity, widening credit spreads and a lack of price transparency in the market. There can be no assurance that the liquidation of collateral securing an investment will satisfy the issuer’s obligation in the event of non-payment, or that collateral can be readily liquidated. The ability to realize the benefits of any collateral may be delayed or limited. Investments in income securities may be affected by changes in the creditworthiness of the issuer and are subject to the risk of non-payment of principal and interest. The value of income securities also may decline because of real or perceived concerns about the issuer’s ability to make principal and interest payments. Investments rated below investment grade (typically referred to as “junk”) are generally subject to greater price volatility and illiquidity than higher-rated investments. As interest rates rise, the value of certain income investments is likely to decline. Bank loans are subject to pre-payment risk. ESG - There is no assurance strategies that incorporate ESG factors will result in more favorable investment performance.