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Sep 15, 2023

The global economy has been resilient and a variety of challenges stemming from the pandemic have become less severe. But the lagged impact of aggressive monetary tightening, in our view, is still likely to eventually push the economy into recession and, in an environment of heightened macroeconomic uncertainty, substantial risk taking is unwarranted and patience is critical.

Economy

  • Most major economies have continued to expand so far this year but face critical headwinds from China’s struggling economy and higher interest rates.
  • The window for a recession may just now be opening. We continue to expect a recession in most of the developed world over the year ahead, though its contours should be mild in depth and short in duration.
  • Our GDP growth forecasts have mostly been raised for 2023 and lowered for 2024, reflecting better-than-expected economic data during the summer and the deferral of the start of the anticipated recession.
  • We believe that inflation can fall faster than the consensus expectation, aided in part by weaker economic conditions, to just above 2.0% by next year.

RBC GAM GDP forecast for developed markets

RBC GAM GDP forecast for developed markets

Note: As of 08/24/2023. Source: RBC GAM

Fixed Income

  • Government-bond yields have climbed to their highest levels since just before the 2008/2009 global financial crisis and at this point represent attractive value.
  • With bond yields at a much higher starting point, the economy likely to weaken and moderating inflation pressures, we believe the risk of capital losses in sovereign bonds is minimal and forecast lower bond yields and thus higher bond prices ahead.
  • Sovereign fixed-income assets are the most appealing they have been in many years and we expect that government bonds will deliver returns in the mid to high single digits over the year ahead, with some regions even capable of low double-digit returns.

U.S. 10-year T-Bond yield

Equilibrium range
U.S. 10-year T-Bond yield

Note: As of August 31, 2023. Source: RBC GAM

Equity Markets

  • Global stocks extended their gains in the past quarter, but their performance so far this year has been increasingly concentrated to the “Magnificent 7”, a group of the largest U.S. publicly listed companies that have benefitted tremendously from emerging trends in artificial intelligence.
  • Underlying stock market breadth has been relatively poor – often an indication that the economy is struggling or set to weaken.
  • Although global equity-market valuations are not unreasonable, earnings are vulnerable to a contraction in economic activity, limiting potential upside in stocks.
  • We expect low-to-mid-single-digit returns for stocks, with relatively worse outcomes from U.S. equities due to their higher valuations and the influence of expensive mega-cap technology names that could falter if the economy entered a downturn.

Major indices' price change in USD

December 30, 2022 to August 31, 2023
Major equity market indices

Note: Magnificent 7 includes Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta and Tesla. Source: Bloomberg, RBC GAM

Discover more insights from this quarter's Global Investment Outlook.

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to provide investment, financial, legal, accounting, tax, or other advice and such information should not be relied or acted upon
for providing such advice. This document is not available for distribution to investors in jurisdictions where such distribution would
be prohibited.



RBC GAM is the asset management division of Royal Bank of Canada (RBC) which includes RBC Global Asset Management Inc.,
RBC Global Asset Management (U.S.) Inc., RBC Global Asset Management (UK) Limited, and RBC Global Asset Management (Asia)
Limited, which are separate, but affiliated subsidiaries of RBC.



In Canada, this document is provided by RBC Global Asset Management Inc. (including PH&N Institutional) which is regulated by
each provincial and territorial securities commission with which it is registered. In the United States, this document is provided
by RBC Global Asset Management (U.S.) Inc., a federally registered investment adviser. In Europe this document is provided by
RBC Global Asset Management (UK) Limited, which is authorised and regulated by the UK Financial Conduct Authority. In Asia,
this document is provided by RBC Global Asset Management (Asia) Limited, which is registered with the Securities and Futures
Commission (SFC) in Hong Kong.



Additional information about RBC GAM may be found at www.rbcgam.com.



This document has not been reviewed by, and is not registered with any securities or other regulatory authority, and may, where
appropriate and permissible, be distributed by the above-listed entities in their respective jurisdictions.



Any investment and economic outlook information contained in this document has been compiled by RBC GAM from various
sources. Information obtained from third parties is believed to be reliable, but no representation or warranty, express or implied,
is made by RBC GAM, its affiliates or any other person as to its accuracy, completeness or correctness. RBC GAM and its affiliates
assume no responsibility for any errors or omissions.



Opinions contained herein reflect the judgment and thought leadership of RBC GAM and are subject to change at any time. Such
opinions are for informational purposes only and are not intended to be investment or financial advice and should not be relied or
acted upon for providing such advice. RBC GAM does not undertake any obligation or responsibility to update such opinions.



RBC GAM reserves the right at any time and without notice to change, amend or cease publication of this information.



Past performance is not indicative of future results. With all investments there is a risk of loss of all or a portion of the amount
invested. Where return estimates are shown, these are provided for illustrative purposes only and should not be construed as a
prediction of returns; actual returns may be higher or lower than those shown and may vary substantially, especially over shorter
time periods. It is not possible to invest directly in an index.



Some of the statements contained in this document may be considered forward-looking statements which provide current
expectations or forecasts of future results or events. Forward-looking statements are not guarantees of future performance or
events and involve risks and uncertainties. Do not place undue reliance on these statements because actual results or events
may differ materially from those described in such forward-looking statements as a result of various factors. Before making any
investment decisions, we encourage you to consider all relevant factors carefully.





® / TM Trademark(s) of Royal Bank of Canada. Used under licence.


© RBC Global Asset Management Inc. 2023


Publication date: September 15, 2023

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