Global Investment Views - September 2023

Saturday 09 September 2023

August was a month when risk assets, after giving back some of their gains, closed flat, whereas yields on 10Y USTs reached 15-year highs. On the one hand, the US displayed economic resilience on the back of fiscal incentives and business investment. However, sentiment was affected by slowing momentum in China, regarding which we downgraded our 2023 growth forecasts from 5.1% to 4.9%.

Importantly, forward-looking indicators in the US and Europe point to an imminent deceleration. All this creates low visibility moving into autumn and we see the following factors shaping the global economy:

  • Although we revised up our 2023 US growth forecasts from 1.6% to 2.1%, we still think that a (mild) recession from Q1 is possible, due to the lagged effect of tightening financial conditions and dwindling excess savings. However, business investments could present a challenge to our decelerating consumption scenario.
  • Terminal rates and inflation dynamics. We see upside risks to our 5.5% rate forecasts for the Fed. More clarity on the direction of services and core inflation is needed to confirm a downward path.
  • Lackluster European growth. Recession could be averted at a regional level this year, but divergences across countries are likely: restrictive policy, diminishing fiscal support, waning demand.
  • China is moving to a slower, sustainable growth model, given the government’s willingness to accept near-term pain for better growth quality long term. This would affect Europe and other EM.

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