Opening Note
The first half of 2023 presented a combination of expected outcomes as well as unexpected events.
As anticipated, headline inflation worldwide has been gradually easing, although core inflation remains persistent. The global economy is also experiencing a slowdown. As such, there is a likelihood that the global monetary policy tightening cycle may be concluding. Nevertheless, policy rates are expected to stay higher for longer.
However, we encountered a crisis of confidence in the banking sector, resulting in the failure of three regional banks in the United States and the UBS takeover of Credit Suisse outside the US. Whether concerns about the banking sector will resurface in the event of a crisis in US commercial real estate remains uncertain, but the likelihood of a systemic risk is low.
Moreover, there has been disappointment regarding China's uneven post-COVID economic recovery. Many had relied on Chinese pent-up demand to bolster the global economy.
Looking ahead to the second half of 2023, global economic growth is expected to decelerate, potentially leading to weakened business and consumer sentiment. Further uncertainties include the unresolved Russia-Ukraine war, ongoing US-China tensions and the recovery path of business and consumer sentiment in China.
While economic and geopolitical risks may cast a shadow in the near-term, we aim to provide investment insights that will help you construct a robust and resilient portfolio to achieve your long-term financial goals.
Ronnie Lim
Managing Director & Country Head
Personal Financial Services
2H 2023 Market Outlook Video
With the global economy weakening, you might be wondering if we are going to enter a recession and how this would affect your investments. Learn how you can fortify your investment portfolio in our 2H 2023 Market Outlook video.
2H 2023 Macro Outlook
With the first half of the year now in the rear-view mirror, two headwinds we highlighted at the beginning of 2023, monetary policy uncertainty and inflation, are likely to be behind us. The US Federal Reserve (Fed) and other central banks are nearing the end of their tightening cycle, and inflationary pressures are gradually easing in the face of a slowing economy. What confronts us now is uncertainty on the economic front, particularly how quickly the global economy slows.
While recent banking sector turmoil is unlikely to trigger systemic risk, we still need to monitor bank credit conditions and the impact on broader economic activity. We also need to be mindful of US commercial real estate risks, as that could affect the banking sector and broader economic sentiment. Other key areas to keep a close eye on are labour market indicators, consumer spending habits, and corporate earnings.
The economic cycle has four clear and inevitable stages. We are now past the peak of the cycle and are in the slowdown phase. It is hard to accurately pinpoint when a recession starts or predict how long it lasts. While economic growth has slowed, recent data suggests a recession is not imminent.
As for recent divergence across stock markets, US and Japan outperforming Emerging Markets and large-cap stocks outperforming small-caps, it is unclear whether these trends will continue or reverse in the coming months. Until it is apparent, hedging uncertainties as a portfolio strategy will be prudent.
Having passed the peak of the economic cycle, build a defensive and diversified portfolio to buffer against possible turbulence in the near-term. This is especially if tighter financial conditions cast a bigger-than-expected drag on economic growth. At the same time, there are still pockets of investment opportunities to be tapped on as the labour market and services sector remain strong. | MOY, M0Y
Source: UOB PFS Investment Strategists.
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2H 2023 Outlook
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Credits
Credits
Managing Editor
- Winston Lim, CFA
Singapore and Regional Head,
Deposits and Wealth Management
Personal Financial Services
Editorial Team
- Abel Lim
Singapore Head,
Wealth Management
Advisory and Strategy - Michele Fong
Head, Wealth Advisory and Communications - Tan Jian Hui
Investment Strategist
Investment Strategy and Communications - Low Xian Li
Investment Strategist
Investment Strategy and Communications - Zack Tang
Investment Strategist
Investment Strategy and Communications - Nicholas Bryan Chia
Intern
UOB Personal Financial Services Investment Committee
- Singapore
- Abel Lim
- Ernest Low
- Michele Fong
- Tan Jian Hui
- Low Xian Li
- Zack Tang
- Jonathan Conley
- Alexandre Thoniel, CAIA
- Chen Xuan Wei, CFA
- Chia Hong Wei
- Daphne Chan
- Marcus Lee, CFTe, CMT
- Ivan Hu
-
Malaysia
- Ryan Tan
- Mow Wei Sern
- Thailand
- Suwiwan Hoysakul
- Boonnisaed Thanyaworaanan
- China
- Huang Li Li
- Indonesia
- Diendy
Important notice and disclaimers
The information contained herein is given on a general basis without obligation and is strictly for information purposes only. Such information is not intended to be, and should not be regarded as, an offer, recommendation, solicitation or advice to buy or sell any investment or insurance product and shall not be transmitted, disclosed, copied or relied upon by any person for whatever purpose. Any description of investment or insurance products, if any, is qualified in its entirety by the terms and conditions of the investment or insurance product and if applicable, the prospectus or constituting document of the investment or insurance product. Nothing contained herein constitutes accounting, legal, regulatory, tax, financial or other advice. If in doubt, you should consult your own professional advisers about issues discussed herein.
The information contained herein, including any data, projections and underlying assumptions, are based on certain assumptions, management forecasts and analysis of known information and reflects prevailing conditions as of the date of the publication, all of which are subject to change at any time without notice. Although every reasonable care has been taken to ensure the accuracy and objectivity of the information contained herein, United Overseas Bank (Malaysia) Bhd. (“UOB”) and its employees make no representation or warranty of any kind, express, implied or statutory, and shall not be responsible or liable for its completeness or accuracy. As such, UOB and its employees accept no liability for any error, inaccuracy, omission or any consequence or any loss/damage howsoever suffered by any person, arising from any reliance by any person on the views expressed or information contained herein. [MOY]
Any opinions, projections and other forward looking statements contained herein regarding future events or performance of, including but not limited to, countries, markets or companies are not necessarily indicative of, and may differ from actual events or results. The information herein has no regard to the specific objectives, financial situation and particular needs of any specific person. Investors may wish to seek advice from an independent financial advisor before investing in any investment or insurance product. Should you choose not to seek such advice, you should consider whether the investment or insurance product in question is suitable for you. [M0Y]
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