IFI Multi-Sector Asset Allocation Outlook - Q2 2023

IFI macro factor outlook (three-month outlook)
Global growth: Neutral
Global growth continues to show positive momentum, and China’s recovery following its COVID reopening continues. Growth is largely expected to be below potential, but positive. This is not a bad outcome for financial markets overall. The possibility of a recession continues to be a risk, but it is not in our base case.
Global inflation: Below expectations
Inflation has likely peaked. We expect inflation to decline through the balance of 2023 in the US and Europe, allowing the US and European central banks to stop hiking rates and contemplate cutting rates as 2023 evolves.
Global policy and financial conditions: Neutral
The European Central Bank (ECB) will likely continue to tighten rates in the coming quarter, but the end of rate hikes is near. The US Federal Reserve (Fed) may have completed its rate hike cycle but is committed to keeping rates high for a considerable period of time. Central banks continue to be a negative factor in our outlook. Any signs toward a more dovish pivot by central banks would be a positive signal, in our view, and would likely improve the outlook for risky assets globally.