Equities strongly outperformed 2022 year-end expectations. A quicker-than-expected retreat in inflation, a stronger-than-expected economic activity, and advances in emerging technologies, such as artificial intelligence, all contributed to the recent rally. Importantly, gains were largely concentrated in large growth companies.
EM economies are expected to outperform their DM peers. Developed markets have avoided recession thus far but are likely to experience one in late-2023. Meanwhile, emerging markets, led by India and China, are expected to contribute around 70% of global GDP growth in 2023.
Central bank rates are expected to remain elevated for years. Structural shifts in supply and demand suggest inflation pressures will persist. This will push monetary authorities to maintain restrictive policy in short-to-medium term.
Given the strong performance in 1H23, investors should stay diversified and focus on quality. The recent rally in US equities suggests there is less room for growth in broad markets. Instead, investors should focus on growth opportunities in quality companies, emerging technologies, other specific segments
