As headline inflation rates are likely to come down in the near term, tightening monetary policies from both US and European central banks are unlikely to continue into 2023, according to Invesco at a media briefing.
Nonetheless, Western central banks are more likely to overshoot in their tightening, increasing the risk of recession and keeping market volatility high.
Therefore, the US asset manager favours credit risk over equity risk in 2023, especially US investment grade bonds.
“We see the US economy likely to avoid any significant kind of recession. It is either a relatively modest economic downturn or an actual recession that is relatively shallow. In that environment, I would anticipate US investment grade to perform well,” said Kristina Hooper, chief global market strategist at Invesco.
“My expectation is that we will see inflation moderating, the Fed will stop tightening and I think the US economy will…
