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Investors must differentiate between useful information and random market fluctuations in the second half of 2023, as stubborn inflation, tightening financial conditions, a US regional banking crisis, and fading economic growth in the developed economies could affect financial asset performance.
Three themes to watch in the second half of 2023
WEBINAR
Webinar replay: 2023 Midyear Market Outlook
Listen to our Chief Investment Officers, Arif Husain, Sébastien Page, and Justin Thomson as they share insights on the major themes expected to impact markets over the coming months, investment opportunities and potential risks for the remainder of 2023.
Investment Leaders
Arif Husain
Chief Investment Officer,
Head of International Fixed Income
Sébastien Page
Chief Investment Officer,
Head of Global Multi-Asset
Justin Thomson
Chief Investment Officer,
Head of International Equity
Ritu Vohora
Investment Specialist,
Capital Markets
Regional Outlooks
China Outlook
Recent softness is unlikely to derail 2023’s recovery. We continue to find investment ideas in domestically listed A-shares.
Japan Outlook
Despite heightened macro uncertainty, Japan’s TOPIX Index hit a 33-year high in May—an indication that the Japan story is gaining momentum.
2023 Midyear Tactical Allocation Views
As of May 31, 2023
The tactical allocation views are prepared by the T. Rowe Price Multi-Asset Division.
These views are informed by a subjective assessment of the relative attractiveness of asset classes and subclassesover a 6‑ to 18‑month horizon.
Outlook remains uncertain due to tight financial conditions, a slowing economy, and elevated valuations. However, a resilient labor market, services sector strength, and positive sentiment around AI are providing support.
Interest rate volatility could remain elevated as central banks continue to balance persistent inflation and growth concerns.Credit sectors continue to offer attractive valuations with broadly supportive fundamentals.
Cash currently offers attractive yields, a shorter duration profile if interest rates drift higher, and provides liquidity should market opportunities arise.
This material is provided for informational purposes only and is not intended to be investment advice or a recommendation to take any particular investment action.
Despite a resilient economy, the outlook remains clouded by Fed uncertainty, manufacturing sector weakness, and narrow market breadth. Elevated valuations make large-cap U.S. equities unappealing given this backdrop.
Valuations are attractive on a relative basis and local currencies have room to appreciate. However, the impact of China’s economic reopening has been disappointing thus far and global monetary policy remains a headwind.
Valuations are attractive on a relative basis and the euro has room to appreciate; however, restrictive monetary policy remains a headwind.
Japan has historically cheap valuations and, despite cyclical concerns, should continue to benefit from better corporate governance and improved pricing power.
Valuations and currencies are attractive and central bank tightening may have peaked. Meanwhile, Chinese growth momentum has stalled pending further stimulus.
The asset classes across the equity and fixed income markets shown are represented in our multi‑asset portfolios. Certain style and market capitalization asset classes are represented as pairwise decisions as part of our tactical asset allocation framework.
This material is provided for informational purposes only and is not intended to be investment advice or a recommendation to take any particular investment action. Information and opinions, including forward looking statements, are derived from proprietary and non‑proprietary sources deemed to be reliable but are not guaranteed as to accuracy.
Despite resilient fundamentals, lagged effects of rapid Fed hikes and tighter lending standards warrant caution.
Developed ex-US yields could remain volatile as global central banks balance elevated inflation versus slower growth.
While yield volatility could persist near-term, longer duration Treasury bonds may have peaked and offer ballast amid a deteriorating macroeconomic backdrop.
Core inflation is proving to be stubbornly high, but upward price pressures are easing. However, slower inflation rates already are priced into current breakeven yields.
Credit fundamentals and attractive yields remain supportive. Although default rates are rising from historically low levels, they are not expected to rise significantly above long-term averages.
The asset classes across the equity and fixed income markets shown are represented in our multi‑asset portfolios. Certain style and market capitalization asset classes are represented as pairwise decisions as part of our tactical asset allocation framework.
This material is provided for informational purposes only and is not intended to be investment advice or a recommendation to take any particular investment action. Information and opinions, including forward looking statements, are derived from proprietary and non‑proprietary sources deemed to be reliable but are not guaranteed as to accuracy.
VIDEO
Summary with Ritu Vohora
Investment Specialist Ritu Vohora shares important key takeaways from this year’s Midyear Market Outlook in under two minutes.
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