Mid-month chart book 

The International Monetary Fund (IMF) revised its 2023 global economic growth outlook downward to 2.7% from 2.9% and surprisingly kept the 2022 growth figure at 3.2%. The revised figures are still above consensus estimates, including ours. We expect further downgrades to the IMF outlook during the rest of the year, including a half-percentage point decrease for 2022. Furthermore, the 2023 outlook could fall below 2% if the European energy crisis leads to bottlenecks in supply chains or if over-tightening in financial conditions leads to a liquidity crisis in the vulnerable parts of the global financial system.

We remain significantly underweight international developed markets with the slowing global economic backdrop breaking vulnerable parts of the global financial system. Last month, we noted that Europe is in a leadership crisis, most notably in the U.K. Liz Truss became the new Prime Minister of the U.K. after a polarizing internal election process within the Conservative Party. Truss and her Chancellor, Kwasi Kwarteng, introduced an un-funded spending budget that favored tax cuts for corporates and high earners. The so-called mini-budget created chaos in the U.K.’s bond markets that pushed the Bank of England to react to calm down the market’s jitters. Eventually, Truss had to announce an embarrassing U-turn in proposed policies, and the Chancellor had to resign.