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June 2023 / VIDEO

2023 Midyear Market Outlook Summary video with Ritu Vohora

Video Transcript

As we look forward to the rest of 2023, key themes for markets remain centered on inflation, monetary policy, and recession risk.

However, macro signals are mixed, with stock and bond markets pricing in different scenarios – the latter implying recession.

In this environment, effective active investing is about finding the signal, through the noise.

This task will be especially critical in the coming months, as we look for signs of financial market recession, as a precursor to an economic recession.

Many economies have demonstrated remarkable resilience this year, despite aggressive rate hikes and the removal of liquidity.

Among the tailwinds are strong labor markets, China’s reopening, softening inflation and the Fed nearing an end to its hiking cycle.

However, we’ve not felt the full effects of tightening yet. This paints a more bearish perspective heading towards year-end.

Furthermore, inflation remains sticky and as such rates are likely to be ‘higher for longer’.

Bond yields have reset to their most attractive levels in decades. But, are bonds back?

Rate volatility has been elevated and expectations are for a shift to credit volatility.

Investors need to be selective, but there are opportunities as the yield curve normalizes.

With monetary policies likely to diverge, taking a global approach - with active duration and curve management, will be critical.

We find value in areas such as high yield and emerging market debt.

Adding quality duration could also act as a hedge, to a growth shock.

Equity markets have rallied year-to-date; however, it’s been a narrow rally.

Generative AI momentum has picked up and is poised to reshape the investment landscape – but investors need to look beyond the hype.

And while earnings have been resilient, estimates may be too high amid slowing growth.

A focus on profitability and starting valuations will be important.

We remain underweight stocks but are leaning into selective opportunities in small caps, emerging markets and Japan.

Staying active and diversified will be key, to finding signals amid the noise.

Market sentiment is likely to gyrate between bullish and bearish narratives.

IMPORTANT INFORMATION

This material is being furnished for general informational and/or marketing purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice, nor is it intended to serve as the primary basis for an investment decision. Prospective investors are recommended to seek independent legal, financial and tax advice before making any investment decision. T. Rowe Price group of companies including T. Rowe Price Associates, Inc. and/or its affiliates receive revenue from T. Rowe Price investment products and services. Past performance is not a reliable indicator of future performance. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested.

The material does not constitute a distribution, an offer, an invitation, a personal or general recommendation or solicitation to sell or buy any securities in any jurisdiction or to conduct any particular investment activity. The material has not been reviewed by any regulatory authority in any jurisdiction.

Information and opinions presented have been obtained or derived from sources believed to be reliable and current; however, we cannot guarantee the sources’ accuracy or completeness. There is no guarantee that any forecasts made will come to pass. The views contained herein are as of the date written and are subject to change without notice; these views may differ from those of other T. Rowe Price group companies and/or associates. Under no circumstances should the material, in whole or in part, be copied or redistributed without consent from T. Rowe Price.

The material is not intended for use by persons in jurisdictions which prohibit or restrict the distribution of the material and in certain countries the material is provided upon specific request. It is not intended for distribution to retail investors in any jurisdiction.

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