Capital Markets Outlook  |  Q2 2023

Asset allocations: Continue to favor a defensive posture

  Current quarter
  Previous quarter
    Change from previous quarter
Underweight Neutral Overweight
Equity
U.S. large cap
U.S. small cap
U.S. value
U.S. growth
Europe
Japan
Emerging markets
Fixed income
Interest-rate sensitive
U.S. government
Non-U.S. developed country
Emerging markets
Corporate credit
Investment grade / High yield / Floating rate
Securitized
Residential mortgage credit
Commercial mortgage credit
Prepayment risk
Commodities
Cash

Currency views

U.S. dollar versus
Favor other Neutral Favor dollar
  Euro
  Pound
  Yen

Remain underweight to equity risk

Large-cap equity indexes look expensive and could face further downward earnings pressure.


High-yield spreads are tight

Corporate high-yield bond spreads appear tight relative to volatility and a likely rise in the default rate.


Neutral on commodities

After a volatile quarter, a shift from overweight to neutral for commodities.


Be careful what you wish for

April 12, 2023  |  Capital Markets Outlook

Fears of a U.S. recession are growing as credit delinquency begins to rise toward pre-pandemic levels. Explore the risk and realities of how a credit crunch could unfold.

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