Perspectives: For the 12-month period beginning October 1, 2023

In the summer edition of Perspectives we asked whether investors should consider a global recession avoided or delayed. We noted our baseline scenario continued to call for a substantial weakening in cyclical economic conditions, consistent with a mild recession. But so far this year things have not been as painful as we expected.

In this edition of Perspectives, the CIBC Asset Management Multi-Asset and Currency team updates our 12-month outlook for growth and inflation as of September 30, 2023. There are no significant changes in our views on the broad direction of the global economy.

A mild recession remains likely as the fight against inflation remains a priority across the Developed economies. Interest rates will likely stay higher for longer, as the goal of central banks remains to slow down economic activity.

We also discuss the investment implications of our economic views. Despite our continued call for a mild global recession, we are looking for opportunities in asset markets, and particularly high quality segments of the fixed income market. Across the range of plausible economic scenarios, including our base view, yields are likely close to their peak for this cycle. This gives us confidence investment-grade fixed income can provide investors with a positive return over the coming 12 months that exceeds cash interest rates.

We have embraced this opportunity in our Tactical Asset Allocation. We are also looking for unfolding opportunities in Canadian equities. Although recession risk threatens a further, shallow correction lower in the near term, this market’s valuation has improved meaningfully, setting the stage for outperformance in the longer term.

We hope our insights help you navigate market volatility as you stay focused on your long-term investment goals. At CIBC Asset Management, we’re committed to providing market and investment insights as well as best-in-class research. If you have any questions or would like to discuss our insights and commentary, please contact your advisor or CIBC representative any time.