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Citi Global Wealth Investments

Outlook 2023

Roadmap to Recovery: Portfolios to Anticipate Opportunities

Our Expectations

  • Global GDP growth: 1.7% in 2023, 2.3% in 2024
  • Shallow 2023 recession in the US, worse in Europe and UK
  • China to see recovery as COVID restrictions ease
  • US inflation falls to 3.5% by end-2023 and 2.5% by end-2024
  • Global earnings per share to fall 10% in 2023
  • Fed to start cutting interest rates by second half of 2023
  • Among the greatest risks to our outlook would be persistent 1970s-style inflation
  • By contrast, the US might avoid recession if inflation drops faster than expected
  • Other improbable risks include US-China military escalation or complete trade breakdown

Putting Cash to Work in a Higher Interest Rate Environment

Rising rates and volatile markets unsettled investors in 2022. The new higher rate environment creates potential opportunities to seek income across asset classes.

  • Difficult market conditions in 2022 increased the temptation to sit on excess cash
  • Sitting on excess cash is a risky strategy, which almost always leads to missing out on recoveries
  • We believe 2022's turmoil has created more viable opportunities for putting cash to work
  • Our expectation is for interest rates to peak and inflation to fade over time
  • We favor various short- and intermediate-term US dollar denominated bonds
  • We also like dividend grower equities from resilient industries

Unstoppable Trends Are Changing the World

Unstoppable Trends are long-term phenomena that are transforming how we live and do business. We seek portfolio exposure to these powerful forces.

  • G2 polarization intensifies
    The US-China technology trade war increases the challenges facing investors. But it also creates portfolio diversification potential
  • Greening the world: Energy security is vital
    Fossil fuel energy dependence threatens economic growth and national security. We believe this strengthens the case for the clean energy transition and for positioning portfolios accordingly
  • Deepening digitization
    We highlight a range of attractive areas including semiconductors and robotics & automation, accessible via both public market and alternative strategies
  • Seeking to boost portfolio immunity with healthcare
    Aging populations and the expanding global middle class will likely boost healthcare demand long-term. Among our favored areas are biologics, life science tools, value-based care and agetech

Building Dynamic Portfolios

  • Near-term, we emphasize quality, such as short-term US dollar investment grade fixed income
  • Likewise, we favor more defensive equities, including dividend growers
  • For suitable investors, capital markets and alternative strategies also offer potential opportunities to put cash to work
  • As interest rates peak, we expect to shift first to quality, growth equities in non-cyclical industries; cyclicals later on
  • Once dollar strength reverses, we see deep value potential in various non-US assets and currencies, such as income-producing real estate
  • Our strategic asset allocation methodology points to 10-year annualized returns of 10% for Global Equities, 5.1% for Global Fixed Income and 3.4% for Cash
  • We continue to favor exposure to the drivers of long-term economic growth

All forecasts are expressions of opinion, are subject to change without notice and are not intended to be a guarantee of future events.

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