• Our capital market forecasts increased across all asset classes, most materially in fixed income given the change in yields over 2022.
• The three themes we see driving the market, Persistent Volatility, Moderating Inflation and a Bear Market Bottom, will come to life over different time periods in 2023 and beyond.
• Year-over-year we are adding to high quality fixed income and high yield primarily by reducing dynamic bonds and increasing U.S. mid and small caps from U.S. large caps. We remain modestly overweight to non-U.S. equity but are not adding to the position.
Our investment views are based on a simple idea: as facts change, so may our outlook. The last few years have been an interesting period for this ethos as our annual outlook is beginning to feel like a game of ping-pong, oscillating between bulls and bears, as the environment shifts around us. Our 2021 outlook, Poised for Growth, discussed optimism as the proverbial economic doors swung open as COVID eased. Navigating Moderation, our 2022 outlook, moved in the other direction, calling for volatile markets based on (among other factors) persistent inflation, the Fed stepping on the economic breaks and market valuations and expectations set for perfection. In this outlook, Goodbye TINA (there is no alternative), we find ourselves on the other side of the market pendulum, seeing greater opportunity in 2023 albeit amidst a period of considerable uncertainty. Our outlook is tempered with humility and pragmatism, recognizing the future remains uncertain, as it always has. However, as the market dynamics have changed so have our opinions and we are excited to share our view for 2023 and beyond.