The Impact of Quantitative Tightening on Asset Class Returns: Q2 2023 Forecast

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The report "Asset Class Returns Forecasts Q2 2023" discusses the effects of rapid Quantitative Tightening (QT) by Developed Market (DM) central banks. It suggests that the impact is evident across price dynamics and financial stability. However, core measures of price growth indicate persistence, implying that the price stability battle may continue. Additionally, the banking sector faces challenges due to multiple rate hikes and reduced liquidity.

Short-term Weakness and Long-term Predictions

Short-term perspectives suggest economic weakness across DM countries, primarily driven by banking sector stress and the credit crunch. Central banks may pause their hiking intentions due to a more data-dependent approach. The report maintains its long-term assumptions from the last quarter, still predicting normalised interest rate levels and flatter curves for developed economies. Despite less attractive starting valuations, long-term expected returns for fixed income instruments remain appealing.

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