Capital Markets Outlook  |  Q1 2023

Asset allocations: Be cautious with risk assets as rate increases continue.

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Underweight Neutral Overweight
U.S. large cap
U.S. small cap
U.S. value
U.S. growth
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
Residential mortgage credit
Commercial mortgage credit
Prepayment risk

Currency views

U.S. dollar versus
Favor other Neutral Favor dollar

Equities to remain under pressure

Investors should exercise caution with equities, but also be aware of the potential for a bear market rally as in early Q3.

Highly selective in fixed income

Caution is warranted for high-yield bonds and other areas of corporate credit, while securitized sectors offer more attractive opportunities.

Commodities could benefit from energy rally

In energy markets, inventory levels of distillates remain tight and production may be constrained in the near term.

Slow your (pay)roll

January 12, 2023  |  Capital Markets Outlook

We believe markets expect inflation to decline sooner than it will, and that there is limited upside for stocks.

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