Insights

Shifting sands

World growth in 2023 is set to be a little lower than the pre-pandemic rate but, more importantly, the pattern is changing. Where interest rates settle after the tightening process comes to an end remains key for financial markets.

Monthly global house view & investment perspectives

Markets paused in August following the strong rally seen in the first seven months of 2023. The MSCI World index lost 2.6% in August but nonetheless ended the month 14.9% higher than at the end of last year. The equity market sell-off occurred as long bond yields rose, with the US 10-year Treasury yields climbing above 4.3% for the first time since 2007. The increase in US bond yields relative to European yields supported the US dollar which also benefited from increased investor risk aversion.

Monthly global house view & investment perspectives

After a strong June, markets enjoyed another positive month in July with the MSCI World index rising around 2% over the month. Global equities have now returned more than 16% year-to-date and are close to recouping the losses experienced in 2022. Fixed income markets also mostly registered positive returns in July. The Bloomberg Barclays Global Aggregate index was up about 1% for the month, though the year-to-date returns are significantly more muted than equities at just over 2%.

Outlook 2023: Mid-year review

Finding a new balance

The search for a new equilibrium will, we think, be a key theme for the remainder of 2023. In economies, that search relates to growth and inflation. In financial markets, it entails finding sustainable bond yields.

Monthly global house view & investment perspectives

Global equity markets have been rangebound for some time and the trend continued in May with a 1.25% drop in the MSCI World index, most of which came on the last trading day of the month. Even if some elements of concern regarding the economic situation seem to have diminished, the risks remain mainly to the downside for growth. Nonetheless, corporate earnings beat expectations, especially for technology companies, reinforcing confidence that markets can continue to rally.