Schroders on global markets outlook for 2023

As 2022 draws to a close and the 2023 investment horizon looms ahead, financial experts at Schroders have been peering into their crystal ball to anticipate the market moves that lie in wait. Dorian Carrell, Fund Manager at Schroders, recently shared some key insights during an interview with CNBC Africa, shedding light on the economic outlook for the coming year. Carrell's assessment touched on various regions, including the U.S., Europe, and Asia, offering a nuanced perspective on the potential scenarios that may unfold in 2023. Let's delve deeper into the key takeaways from the interview. Starting with the U.S., Carrell pointed out that while the current economic growth is robust, there are concerns about an impending recession in the second half of 2023. The need to address inflationary pressures could lead to a slowdown in growth, prompting the Federal Reserve to adjust its rate hike pace. Carrell highlighted the structural shift towards higher interest rates as a significant departure from the past economic landscape. Moving on to Europe, Carrell noted a more optimistic outlook emerging in the region. Despite facing challenges such as the energy crisis and geopolitical tensions, there are signs of potential opportunities on the horizon. The shift towards fiscal stimulus and efforts to reduce dependence on Russian energy sources are among the factors contributing to a slightly brighter outlook for Europe. In Asia, particularly in China, Carrell highlighted a gradual uptick in growth rates, with implications that extend beyond traditional commodity markets. The prospect of a 5% growth target in China could have ripple effects across various sectors, indicating a positive trend in the region. Carrell's assessment of a potential recession in the U.S. raised questions about the Fed's inflation-targeting strategy. While the central view at Schroders leans towards a -1% growth forecast for 2023, there are uncertainties surrounding the Fed's ability to achieve its 2% inflation target. The debate over policy decisions and the potential risks of a misstep by the Fed loom large as the new year approaches. Despite the concerns over a possible recession, Carrell emphasized a gradual and cautious approach by the Federal Reserve in the rate adjustment process. The discussion also touched on emerging markets, where the rate cycle has followed a different trajectory compared to the U.S. Carrell highlighted the proactive stance taken by many emerging markets in raising rates ahead of the Fed, positioning them differently in the economic landscape. The prospect of positive earnings growth in emerging markets, coupled with China's evolving policies, presents a more favorable outlook for these regions. When assessing the risks and opportunities in the global commodity market, Carrell pointed to factors that could sway prices in either direction. While risks include the Fed's monetary policy decisions and global recession concerns, the reopening of China and demand-supply dynamics could provide tailwinds for commodities. In conclusion, Carrell's insights underscore the complex and dynamic nature of the global economic landscape as we transition into 2023. Navigating the uncertainties and leveraging emerging opportunities will be key for investors and market participants in the year ahead.