Press release
Northern Trust 2023 Outlook: Markets and Economy Pivot from Inflation and Monetary Policy Fears to a Weak Global Economy
Central Banks to Pause Rate Hikes as Inflation Declines CHICAGO & LONDON--(BUSINESS WIRE)-- Northern Trust, a leading global asset manager with US$1.2
About this update from Northern Trust Corporation
[{"type":"text","content":"\nCentral Banks to Pause Rate Hikes as Inflation Declines\n\n CHICAGO & LONDON--(BUSINESS WIRE)--\nNorthern Trust, a leading global asset manager with US$1.2 trillion in assets under management, expects 2023 to be a turbulent year as conditions pivot from inflation and monetary policy fears to a weak global economy, but the firm also expects market volatility to somewhat temper due to lower inflation and a pause in central bank interest rate increases. A reduction in rates is not seen as likely.\n\n“While we believe there is downside risk from fundamentals, we see upside potential from likely improved investor sentiment, “said Northern Trust Chief Investment Officer Angelo Manioudakis. “Financial markets will have to balance the immediacy of disappointing global growth against the backdrop of greater certainty on central bank policy, a reduction in interest-rate volatility and the potential of a return to growth later in the year.”\n\nChange Among Constants\n\nThese changing conditions are behind the main message of Northern Trust’s 2023 Outlook being that it will be a “pivotal” year, although some conditions will persist.\n\nThe firm expects growth to continue to be constrained globally, with some regions arguably already in recession and others on the precipice. It also believes that China’s pandemic-to-endemic transition will continue to materially impact the outlook for global economic demand.\n\nInvestment Themes Drive Outlook\n\nNorthern Trust’s 2023 Outlook builds off the firm’s long-term Capital Market Assumptions (CMA) report, a forward-looking, historically aware five-year forecast that guides the firm’s strategic asset allocation recommendations. At the core of the CMA are investment themes, typically five or six, based on forces that Northern Trust identifies as driving markets over the next five years. The six themes from the most recent (August 2022) CMA are reflected throughout the 2023 Outlook. Among them are: “Slow Growth Transitions,” “Inflation Recalibration” and “Monetary Drought.”\n\nThe 2023 Outlook also includes forecasts on a range of asset classes.\n\nHigh Yield Favored in Fixed Income\n\nNorthern Trust expects the bulk of the increase in interest rates is behind us and notes that the pace at which inflation falls will largely determine the rate path going forward. The firm maintains a neutral bias on du...