Outlook 2023: Jody Jonsson (Capital Group)

January 6, 2023

By Jody Jonsson, Portfolio Manager at Capital Group

What is the economic outlook for 2023?

‘Many investors are expecting a return to normal after inflation subsides and central banks stop raising rates. But I believe the world is undergoing significant changes and that investors will need to reset their expectations about how a typical investing environment will look.

The market is grappling with a macroenvironment it hasn’t seen in a long time. Inflation is at its highest since the early 1980s. And until recently we’ve had 40 years of declining interest rates. That is longer than most investment managers’ careers, if not lifetimes. That is part of the reason we see a market struggling to adjust to this new reality. It is easy to assume these are market dislocations that will quickly reverse. But these cycles often last much longer than people anticipate and there is reason to believe higher inflation is structural and likely to persist.

We are living through a historic period of change. The outlook has evolved from a decade of sunny skies to darker clouds. That said, new market environments present new opportunities and that is where experience and flexibility can be essential.’

There is reason to believe higher inflation is structural and likely to persist.