2023 Outlook: Short-term pain, long-term gain

We believe 2023 will offer a considerable brightening of the return outlook for major asset classes. But we first need to brace for more pain in the short term. Stagflationary seasons are typically the toughest times for asset allocators to generate positive returns. This past year has been no exception, with very few places to hide for multi-asset investors. But this might all change in 2023 as we see three major peaks emerge: peak inflation, peak rates, and peak dollar.

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We know from experience that the last leg of a steep climb towards the peak can prove treacherous and markets often tend to overshoot here. That implies more discomfort as exhaustion and capitulation take hold. But brighter prospects will eventually follow.

Our 2023 outlook also digs deep into the world of sustainable investing. Climate change and biodiversity will still create headlines in the year ahead, but other topics will come to the fore as well – most prominently the cost-of-living crisis and income inequality.