Macro Matters November 2023

(Source: Merlea Macro Matters)


The global economic landscape is navigating uncertain terrain, with various factors impacting both developed and emerging markets. While the spectre of a recession hasn’t fully materialised, it’s becoming apparent that certain economic supports are temporary. In some developed countries (DMs), households have drawn down savings bolstered by pandemic-related fiscal policies. Additionally, producers have managed to reduce backlogs stemming from previous supply shortages, and lower commodity prices have provided some relief.

However, it’s important to note that these temporary boosts are on the wane, and previous monetary policy tightening is taking effect. Financial conditions have significantly tightened, and credit growth has weakened or turned negative in advanced economies. While overall consumer spending remains relatively stable, interest rate-sensitive spending is on a downward trajectory. Forecasts still anticipate recessions in many European countries, and there are suspicions of a contraction in US GDP. Rising energy prices may lead to a slight increase in headline inflation in advanced economies, but this is expected to be offset by a continuing reduction in core inflation. This phenomenon is particularly evident in the US, where labour market tightness is already impacting wage growth. Consequently, it’s doubtful that central banks like the Federal Reserve, the European Central Bank (ECB), or the Bank of England will carry out the interest rate hikes that the market anticipates. Instead, there’s a likelihood of earlier rate cuts, especially by the Federal Reserve, and when the time comes, these cuts may be more aggressive than traditionally assumed.

China is poised for a modest cyclical recovery due to increased policy support, although structural challenges may curtail its longevity, and global spillovers may be limited. In emerging markets, leading indicators suggest a slowdown following a strong start to the year, influenced by the weaknesses in developed markets. A notable exception is India, where a pre-election fiscal boost is expected to keep it among the leaders of major economies. Overall, emerging markets are likely to remain at the forefront of policy easing, much as they led the rate-hiking cycle.

Shifting the focus to the United States, the GDP numbers have shown robust growth, reaching 4.9% in the last quarter, the highest pace in nearly two years. Despite the strong GDP performance, several major companies have delivered positive earnings but lowered their guidance for upcoming quarters. The key PCE price index, which serves as the Federal Reserve’s preferred inflation measure, has shown benign inflation trends, contributing to a significant impact on the bond market and sparking a notable rally. Additionally, an uptick in weekly jobless claims indicates a potential weakening in the job market.

As the Federal Reserve continues to assess its monetary policy, there is growing speculation about the possibility of rate cuts. Forward rates are pricing in rate cuts starting around the middle of 2024. However, the timing of these cuts hinges on inflation moving closer to the target and a noticeable economic slowdown, which may become more apparent in the months ahead. Furthermore, the United States is expected to face increased interest costs on its debt as older bonds and Treasury bills with lower coupons mature and are replaced by more expensive securities.

This development could exert significant pressure on the US dollar in the upcoming year, potentially aligning with the theme of a weakening US dollar. Such a scenario could act as a catalyst for stock and commodity markets, and it may pave the way for a bull market in precious metals. Recent geopolitical events, like the situation in Gaza, have already led to a premium on gold prices. This environment of rising geopolitical risks may further bolster the prospects of precious metals and commodities. It’s important to note that the situation in Gaza, justifiably, is not expected to be resolved swiftly and coincides with US engagement in another international front.


Surging U.S. Treasury yields are reshaping the investment landscape, favouring bonds over stocks, intensifying the ongoing equity market sell-off, and potentially impacting long-term equity performance.  For the past 15 years, historically low bond yields had made stocks an attractive choice for investors, coinciding with the U.S. Federal Reserve’s near-zero interest rate policy initiated after the 2008 financial crisis to support the economy.

However, the climb in Treasury yields this year is altering this financial equation. Government bonds are now offering income perceived as risk-free for investors who hold them until maturity. The yield on the benchmark 10-year U.S. Treasury, which moves inversely to bond prices, recently reached 5%, marking its highest level since 2007. This increase has been fuelled by concerns over the Federal Reserve’s hawkish policies and fiscal worries.

Consequently, many investors are reevaluating the role of stocks in their portfolios. A recent survey by BofA Global Research revealed that fund managers have favoured bonds for the majority of 2023, exceeding their historical average allocation. Simultaneously, they have taken an underweight position in stocks.

The recent rapid increase in yields, beginning in March 2023, has had a noticeable impact on stock investors. While the S&P 500 has posted gains of approximately 9% for the year, it has experienced an over 8% decline since reaching its peak in late July. During this period, the 10-year Treasury yield has risen by nearly a full percentage point. Challenges arise as the market adapts to this new financial landscape, as yields reaching 5-5.5% had been the norm in the past, but this hasn’t been the case for many years.

Rising bond yields also raise the cost of capital for companies, potentially posing a threat to their financial stability. Simultaneously, the increased yields on government debt mean that investors can receive a higher reward from these risk-free assets, leading to the reconsideration of investments in stocks.

In addition, the equity risk premium (ERP), which measures the relative attractiveness of equities by comparing the S&P 500’s earnings yield to the 10-year Treasury yield, currently stands at 30 basis points, contrasting with the 20-year average of about 300 basis points. Historically, when the ERP falls below its average, the S&P 500 has delivered average 12-month returns of less than 6%. In contrast, when the ERP exceeds that level, forward returns approach 12%. This dynamic further underlines the shifting dynamics in the investment landscape and its potential impact on investor choices and outcomes.

Listed Property

Year-to-date, Australian Real Estate Investment Trusts (A-REITs) within the S&P/ASX 200 index have seen a 6% decline, with a more significant drop of up to 17% from their peak in February.

Global REITs have encountered a similar fate, experiencing a 10.8% decline over the year-to-date and a substantial drop of up to 20.7% from their peak in 2023. These declines coincide with surging bond yields and central banks’ aggressive monetary policy tightening, all part of a global initiative to combat inflation.

Investor sentiment in the REIT market has waned further over the past month, as it increasingly foresees a prolonged battle to bring inflation back to target and anticipates a more challenging outlook for the global economy. These challenges are compounded by existing structural issues within the commercial real estate (CRE) sector, especially in retail and office spaces.

When comparing the cap rate spread to the yield from Australian 10-year bonds, analysts have considered three different segments – office, industrial and logistics. Taking office as an example, the chart above shows the trend. Assuming bond yields stay where they are and spreads revert to the long-term average, we think there is a material 17-33% downside to asset valuations across our coverage. For a lot of our stocks, especially the larger REITs in the ASX100, whilst their current share prices imply a discount to published NTA, they are broadly in line with our adjusted NTA if cap rates were to be above the 10yr bond yield by an historical average spread.

However, some analysts argue that global REITs are currently undervalued and positioned to deliver robust returns for investors. Notably, the net asset value (NAV) discount on global REITs stood at around 20% as of September 30, 2023.  Historically, when NAV discounts exceed 10%, REITs outperform private real estate by over 9% and equities by 15%. They are seen as vehicles that can “smooth the impact” of economic cycles, providing investors with dependable income streams from contractual leases. Rents generally adjust with inflation, making them a valuable hedge against rising living costs.

In addition to their defensive income characteristics, REITs exhibit strong financial positions, with low leverage levels and a substantial portion of fixed, long-term debt. This financial stability positions them to weather market uncertainties and potentially capitalize on market distress if it arises.

While acknowledging the macroeconomic and structural challenges facing the real estate market, there is confidence in the underlying growth fundamentals. The key factors of supply and demand are expected to play a significant role, with little indication of new property supply in the medium term. As a result, an emerging rental squeeze is anticipated across various real estate asset classes in the coming years.

It’s expected that Australian and global REITs will provide returns of 7.5% and 6.4%, respectively, over the medium term, despite the current challenges they face. This outlook reflects a belief in the long-term resilience and value of REIT investments.

Australian Equities

Valuations in the Australian stock market are looking more appealing, although they may still be influenced by any further corrections in U.S. shares. Nonetheless, several factors are poised to boost shares by year-end. Positive seasonal trends are expected in the coming months, and a continued decline in inflation could alleviate the pressure on central banks, potentially opening the door for future easing measures in the next year. Additionally, the expected recession is likely to be mild, contributing to a positive 12-month outlook for shares.

Despite the challenges posed by high inflation, the Reserve Bank of Australia (RBA) has understandably maintained a cautious tightening bias, reflecting the ongoing risk of further interest rate hikes. Factors such as sluggish productivity, signs of rising wages, elevated petrol prices, and the depreciation of the Australian dollar have further justified this stance. Consequently, there is a 40% likelihood of another rate hike, with close attention on the November meeting (following the release of quarterly CPI data and revised RBA forecasts) and the December meeting (after quarterly wages data) for potential policy actions.

However, concerns have arisen over the recent surge in petrol prices and the decline of the Australian dollar, potentially influencing the RBA’s approach. This situation is more complex than it appears at first glance. The present scenario witnesses declining commodity prices and softer goods prices. The initial enthusiasm of reopening has faded, and monetary policy has tightened, impacting households. While higher petrol prices directly contribute to inflation, their overall impact is expected to be limited or even negative, acting as a restraint on consumer spending.

Secondly, the depreciation of the Australian dollar has not reached a critical level of concern. Recent trends indicate a weaker pass-through effect of currency changes on consumer prices. The lower Australian dollar can be attributed not only to lower interest rates compared to the U.S. but also to “risk-off” sentiment among global investors. This sentiment reflects apprehensions about commodity prices and global growth, potentially having a deflationary rather than inflationary impact. Therefore, the RBA should approach another rate hike with caution, especially when it’s primarily attributed to higher petrol prices and a weaker Australian dollar.

Most Australian households and businesses remain resilient, with most household borrowers capable of adjusting to higher interest rates by reducing discretionary spending, saving less, or using their savings. This adaptability is largely due to the strong labour market, which has led to over 10% real income growth for low-income households. Although arrears have slightly increased, they remain at low levels.

However, a small but growing segment of households is experiencing escalating financial stress. In July, approximately 5% of variable-rate owner-occupier borrowers were cash flow negative, up from 1% in April 2022. About 1.5% of these households are at risk of depleting their financial buffers within six months. A broader assessment reveals that around 13% of borrowers are estimated to be cash flow negative, up from 3% in April of the previous year. Notably, the proportion of households with a variable-rate mortgage, where mortgage payments exceed 30% of their income, has also risen, particularly among low-income households. Despite robust income growth, over 40% of borrowers have savings buffers that would be depleted in three months or less if they were to face unemployment. These financial challenges underscore the importance of ongoing monitoring and the implementation of appropriate policies to support households encountering financial stress in an evolving economic environment.

Global markets

Despite strong U.S. economic growth, the global economic momentum is waning. China’s growth expectations have been revised down to 5% or lower for this year, falling short of the initial projection of nearly 6%. The post-Covid reopening did not bring the expected vitality, and business confidence is weakening. The construction sector, typically a key growth driver, is struggling, and property sales have declined significantly.

European data also points to a slowdown, with business surveys at their lowest levels since 2020 and shrinking exports. The global economic landscape appears less favourable than at any point since the onset of the Covid-19 pandemic. Furthermore, persistent high inflation poses challenges for Europe, with core inflation in the eurozone at +5.3% year-over-year.

In contrast, the U.S. has seen improved data, with annualized core inflation at +4.7%, though still above the comfort zone of the U.S. Federal Reserve.

Central bankers must remain cautious, with markets expecting no further U.S. interest rate hikes and even predicting rate cuts of over 100 basis points in 2024. Similar trends are seen in the yield curves of European and other developed markets. While the base expectation is that the Fed will not cut rates until the second half of 2024, appealing cash yields may tempt investors to maintain higher cash allocations. Historically, long-term yields tend to peak as the Fed completes its hiking cycle, often rallying afterward. This suggests that investors may consider moderately extending their investment duration instead of overemphasising cash holdings.


Market volatility often arises in times of uncertainty or when a wealth of new information overwhelms investors. Currently, both factors are at play. Federal Reserve Chair Powell recently suggested that there won’t be another rate hike at the upcoming Federal Open Market Committee (FOMC) meeting, attributing rising bond yields to revisions in traders’ views on the economy’s strength, fiscal deficits, and Fed bond sales. This led to increased expectations of inflation and more favourable financial conditions.

US GDP growth is expected to be 1.5% in 2023 and just 0.4% in 2024. The latest core Consumer Price Index (CPI) shows inflation up 4.7% year on year – well above the Fed’s 2% target.

The U.S. economy has shown signs of strength, with robust retail sales and a healthy job market. Weekly initial claims for unemployment insurance dropped below 200,000 for the first time since January, indicating solid economic performance and contributing to higher inflation expectations.

Events in the Middle East are also closely monitored for potential signs of conflict or instability, with Israel ordering evacuations near the Lebanese border and the U.S. intercepting a missile from Yemen. Anti-Israel protests and rising attacks on both Arabs and Jews in various locations are causing concerns about terrorism.  Surprisingly, oil prices have remained relatively stable, suggesting that investors are not yet alarmed by potential supply shocks.

Future market developments depend on the Fed’s actions, economic performance, and Middle East events. Notably, yield curves are showing signs of reverting from inversions, historically preceding recessions. However, inversions don’t cause recessions but reflect shifts in monetary policy. Despite monetary tightening, financial conditions remain favourable, the economy is growing, and balance sheets are strong, with Fed Chair Powell acknowledging that monetary policy acts with a lag.


Eurozone business activity has taken an unexpected downturn this month, signalling a challenging start to the fourth quarter and raising concerns about the potential for a recession in the region. The flash Eurozone Composite Purchasing Managers’ Index (PMI), considered a reliable indicator of overall economic health, fell to 46.5 in October, down from September’s 47.2. This is the lowest level since November 2020, excluding the COVID-19 pandemic months, and the worst since March 2013. The reading fell well below the 50-point threshold that typically signifies economic growth and defied expectations for a slight increase to 47.4.

The decline in business activity extended to Germany, Europe’s largest economy, where it contracted for a fourth consecutive month, affecting both manufacturing and services. In France, the second-largest Eurozone economy, business activity also contracted, although the rate of decline softened compared to September.

In the UK, which is outside the EU, businesses reported another decline in activity, indicating potential recession risks. The Bank of England has paused its interest rate hikes in response to signs that previous increases have impacted the economy. The labour market has cooled, with the unemployment rate reaching its highest level since Q3 2021. Despite this, the Bank of England remains vigilant and is ready to implement further hikes if necessary.


The Bank of Japan (BOJ) decided to keep its monetary policy unchanged at the September meeting, with the policy rate remaining slightly below zero and the yield curve control policy maintaining the 10-year yield at zero percent. The BOJ has stood out as the only major central bank among developed economies that hasn’t significantly tightened its policy. This stance might seem peculiar, given that inflation has consistently exceeded the BOJ’s target. However, the central bank is more concerned about falling short of its target than overshooting it, given its history of below-target inflation.

The BOJ is determined to ensure that inflationary pressures are sustained before it abandons its negative interest rate policy, which will require specific economic data changes. One critical change the BOJ seeks is a substantial rise in services inflation, as most of the inflation seen last year was attributed to goods. Higher wage growth should accompany increased services inflation, a point emphasized by Governor Ueda in a recent press conference.

The expectation is that the BOJ will raise rates in the first half of the following year. However, there are uncertainties, such as the labour market not tightening enough to support the desired pay increase.

The current unemployment rate, although low, is still higher than it was in late 2019, and the active job openings to active applications ratio has declined this year, indicating weakening labour demand.

Japan’s intervention to support the yen, which has weakened significantly due to divergent interest rates, remains a possibility but is only a temporary solution. The economic recovery is expected to slow as the output lost during the pandemic has been regained, allowing the BOJ to maintain its dovish monetary stance into 2024. Negative interest rates are likely to exert upward pressure on prices and wages, paving the way for a rate hike in the first half of the year, contingent on substantial wage growth following the “shunto” spring wage offensive in 2024.


China’s primary financial concerns are tied to its property sector. A collapse in this sector would have significant repercussions. However, a key distinction between China’s situation and the 2007-08 US subprime crisis is the absence of readily visible negative equity in Chinese real estate due to substantial down payment requirements, ranging from 60 to 90 percent, particularly for second or third property purchases. While property prices haven’t significantly dropped in most areas, a potential crisis would pose a smaller risk to China’s overall financial stability than the US experienced in the global financial crisis. Nevertheless, it could still result in significant losses in terms of household wealth and economic growth.

China’s fiscal and monetary responses to its current challenges have been relatively modest, despite facing deflation risks, in contrast to the United States and Europe. Real interest rates have remained relatively stable or even increased, even when the consumer price index fell.

This lack of aggressive economic easing aligns with current policy priorities, which focus on supply-side reforms over demand-side considerations. Structural pressures on China’s growth, including regulatory actions impacting business confidence, further complicate the economic landscape. These policies, addressing national security concerns and regulatory issues, reflect the government’s emphasis on security and its willingness to bear associated costs.

It seems that all of that stimulus is finally beginning to take effect, with a broad beat from growth, retail sales, industrial production and unemployment.

To offset these negative policy impacts, the government has introduced new policies aimed at bolstering confidence, supporting private enterprise, foreign-invested firms, and consumption. The government’s 31-point plan released in July 2023 emphasises the importance of the private sector, fair competition, and eliminating entry barriers.

However, the changing geopolitical environment adds uncertainty to the economy, with both China and the United States emphasising national security concerns affecting trade and investment. Collaboration to address globalisation challenges is possible but requires more dialogue.

Third parties, such as the European Union and regional relations like ASEAN, can play a stabilising role in these circumstances. While China’s remarkable economic growth may be winding down due to factors like higher labour costs, deteriorating external conditions, and an aging population, it still maintains vibrancy in sectors such as technology, electric vehicles, green energy, and electronics.

Although regulatory changes have affected some sectors, China’s ability to sustain growth above 9 percent for four decades indicates remaining flexibility. Recent policy announcements show that policymakers respond to economic challenges. Economic activity likely experienced its last significant decline in July 2023, with signs of gradual recovery in subsequent months, particularly in September. So, while China’s economic miracle may be evolving, it has not necessarily come to a definitive end.

Emerging markets

Emerging markets (EM) face increased pressure due to China’s structural economic slowdown, which remains a crucial factor for EM performance. Weak economic momentum, coupled with anticipated structural changes and heightened geopolitical tensions, will weigh on these markets. Growth forecasts for countries highly dependent on China are being revised downward, and EM hard currency bonds may experience a moderate correction. Since the recovery of EM bonds in late 2022 following hopes of China’s reopening, investor sentiment has diverged significantly between higher- and lower-rated countries.

The macroeconomic outlook suggests higher risks than what the markets currently reflect, even for major countries. However, disinflationary pressures and expected Fed rate cuts may offer opportunities for capital appreciation, contingent on the timing, with the possibility of an inflation rebound. General interest rate moderation could alleviate debt-sustainability concerns in these markets. It is expected that the spreads of the benchmark index will widen to 275 basis points by year-end and gradually improve toward the 260-basis point level by 2025. EM local currency yields are expected to exhibit volatility until year-end before resuming their downward trajectory.

As certain central banks initiate policy rate cuts, the uncertain inflation trend dynamics may create turbulence during this early phase of normalisation. This could result in some reversals of rate cuts or a pause in the rate-cutting process, leading to local bond market volatility and a temporary halt in yield declines. It is forecasted that yields will slightly increase until year-end and then gradually decrease in the following year as disinflation trends solidify. For the EM local bond benchmark, this translates to a 6.6% yield and a decline towards 5.5% in 2025.

EM equities are projected to have a lacklustre year in 2024 after trailing the US in 2023. However, the same concerns affecting the US market, which suggest a correction until year-end, also apply to EMs. Additionally, there are worries of a slight USD strengthening until year-end. The outlook for China’s equities is uncertain, with some fundamentals indicating they may be undervalued, but political factors may hinder foreign investment.


Commodities are expected to maintain a stable trading range in the fourth quarter of 2023, although they may exhibit some volatility. This volatility can be attributed to the uneven growth observed in the Chinese economy, particularly within the property sector. Additionally, oil prices will continue to be influenced by decisions made by OPEC+ members. Despite these fluctuations, most commodities, except for chemicals, continue to demonstrate strong underlying fundamentals, which lend support to their prices. It is anticipated that the chemicals market will remain subdued until 2024.


The ongoing conflicts in the Middle East, Eastern Europe, and East Asia have created global market uncertainty. Investors are turning to safe-haven assets like gold due to the potential for these conflicts to impact major oil-exporting nations like Iran and Saudi Arabia. Gold has seen a significant price increase, mainly due to the escalating conflict between Israel and Hamas.

Additionally, the conflicts in Eastern Europe and East Asia, along with global economic volatility, make gold an attractive investment as it traditionally acts as a hedge against inflation. Despite a brief decline in gold prices, there is potential for price appreciation in the coming years, especially if the U.S. continues deficit spending, possibly leading to negative real interest rates. Historically, gold tends to perform well in November and December due to higher jewellery demand and a weaker dollar.

Central banks, including those from advanced and emerging economies, are actively purchasing gold, which is partly driven by geopolitical instability and concerns about the vulnerability of U.S. dollar reserves. Russia and China are notably increasing their gold reserves to protect against potential asset seizures and payment crises caused by sanctions or global financial crises. This strong central bank demand is expected to support gold prices in the long term.


The International Energy Agency (IEA) and OPEC have significantly different forecasts for oil demand growth in 2024. The IEA predicts a slower increase, lowering its projection to 880,000 barrels per day, citing harsher global economic conditions and advancements in energy efficiency that may reduce consumption. On the other hand, OPEC maintains its expectation for robust growth led by China, with a forecast of 2.25 million barrels per day in demand growth for 2024.

The discrepancy between these two forecasts, 1.37 million barrels per day, is substantial and can have implications for the oil market’s strength, impacting prices and fuel costs for consumers and businesses. This difference in demand forecasts also plays a role in the decision-making process of OPEC and its allies, collectively known as OPEC+. Both organizations are in closer agreement for this year’s demand growth, with the IEA raising its estimate to 2.3 million barrels per day, closer to OPEC’s unchanged forecast of 2.44 million barrels per day.

However, the IEA notes signs of demand being affected by rising prices and increasing electric vehicle sales. The oil market has experienced fluctuations, with concerns about global events and their potential impact on supply and demand, such as the situation in Israel and Palestine. Additionally, both organisations have observed demand shifts, with the IEA highlighting demand destruction in lower-income countries and declines in some OECD markets, while OPEC expects demand growth in OECD countries to continue, although the IEA suggests a potential permanent decline in these regions.

The outlook for gasoline demand is also divergent, with the IEA forecasting a decrease in OECD countries in the coming year due to factors like increased efficiency and electric car sales. It’s important to note that oil demand forecasts can be subject to significant revisions due to changes in economic conditions and geopolitical uncertainties.

Agriculture commodities

The ongoing El Niño phenomenon is causing disruptions in global rainfall patterns, and its impact on food production is a mixed bag. This year’s El Niño event, anticipated to strengthen until the end of 2023 and dissipate by mid-2024, is likely to exacerbate food insecurity in specific regions. It affects key commodity crops such as wheat, maize (corn), rice, soybean, and sorghum, impacting crop yields on at least a quarter of global croplands. However, the exact impact on crop yields this year remains uncertain, as it can vary from one El Niño event to the next.

Sector 12 Month Forecast Economic and Political Predictions
AUD 62c-72c


Relative growth differentials favor the U.S. economy and by extension the U.S. dollar. We believe that the U.S. Federal Reserve may be nearing the end of its interest hiking cycle, though this could be challenged if the economy continues to respectively outperform.
Gold BUY

$US1700-/oz- $US2100/oz


Gold experienced an uptick in global markets driven by uncertainty surrounding the Israel-Hamas conflict. Additionally, the dollar and bond yields faced downward pressure due to cautious comments from key US Federal Reserve officials, providing support for the precious metal.
Commodities BUY






We are constructive on commodities as key markets such as oil and copper remain finely balanced and are supported by limited inventories, producer discipline and/or supply shortfalls, with demand potentially benefitting from a China recovery or stimulus.


The price of oil could rise above $100, but we doubt the current demand and supply dynamics will support it there for a sustained period.

Property BUY



Real estate values have been repriced throughout the year, due to the high interest rate environment and the macroeconomic outlook. Vacancies continue moderating but remain well below historical long-term averages across many property types.
Australian Equities BUY


We expect that the Reserve Bank of Australia’s policy is very near to its terminal rate as inflation is cooling and consumer demand is showing signs of slowing. The Australian yield curve is still positively sloped, making it better relative value than many of its peers, and its IG spreads are some of the widest in the developed world and offer above-average pickup to other markets
Bonds Begin to increase duration.


The medium-term highs in the yield curve might now be in for the US bond market. Long-term valuations are attractive, in our assessment, fully reflecting monetary policy that is still expected to tighten a little further. Decelerating growth and tighter bank lending standards complement this view.
Cash Rates Market consensus is for a rate rise of 0.25% Melbourne Cup Day. Current rate 4.10% Cash has appeal as a means of diversification and as a complement to the potential attractions of fixed income markets, and we maintain a moderately constructive view currently.


Global Markets
America Underweight


We look for a U.S. recession to begin in 2024. 2023 is expected to continue to show mixed growth messages as consumer spending is anticipated to continue offsetting weakness in the manufacturing sector.






Earnings picture is becoming less bright, with a slew of profit warnings and weaker economic momentum.

Weaker Chinese growth and debt issues are likely to feed into weaker growth in Europe

Japan Accumulate


Japan equities have stumbled with the (very) partial normalisation of policy, but it does not change the fact that policy remains easy while reforms remain promising.
Emerging markets Start Buying


The region’s economic activity surprised to the upside in 1H23 in Mexico and Brazil, but the growth, like other regions, is expected to decelerate.
China BUY


The Chinese economy looks to be picking up again somewhat. The average of the two Chinese purchasing manager indices for industry climbed for the second consecutive month in September – now above 50.



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