CIO Outlook 2023 | Wealth Management | Deutsche Bank

Resilience versus recession: our 2023 outlook

Our annual outlook considers how slower economic growth in 2023 will not necessarily translate into weaker financial markets and how investors might position their portfolios for the opportunities ahead.

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Policymakers, at least in the U.S. and Europe, now appear resigned to weaker economic growth in 2023. Any recessions are likely to be short-lived, but they will not be painless. The combination of lower growth, lingering inflation and public spending constraints will be difficult for both people and governments. Social inequality will be a topic of immediate and growing importance. 


Slower economic growth in 2023 will not necessarily translate into weaker financial markets, however. In fact, markets could prove more resilient in the coming year than they have been in 2022.


Market volatility in 2022 has been exacerbated by external events and changing expectations around the likely size and speed of monetary policy tightening, in the face of high and persistent inflation. Central banks have struggled to give consistent forward guidance. Confusion in markets has driven sharp swings in bond yields, also destabilising equity markets.


Central banks and investors are likely to find 2023 rather easier. We forecast that inflation will ease down (but stay well above central bank target levels). We hope that major global setbacks (from geopolitics, disease or other factors) can be avoided. As a result, although more central bank rate hikes are in prospect, increases in longer-term government bond yields should be relatively modest from here on. The worst should now be over. For bond investors, yield and quality will no longer be a contradiction.


More stable bond markets should, in turn, help lower equity market volatility. 2023 is likely to
be an acceptable year for equities, but not a great one. Positive returns will be driven by some modest price/earnings expansion and dividends – but earnings per share will be stagnant. In this calmer environment, relative regional valuations may become more important.


2023 could also see a more stable USD with the Fed’s likely future hiking programme probably now sufficiently priced in. In fact, the EUR could strengthen slightly over the course of the year, given our expectation that inflation will come down more slowly in the Eurozone than in the U.S.


Of course, next year will not just be about inflation and monetary policy tightening. China, for example, will be following a rather different policy path. We think that continued domestic stimulus will eventually succeed in turning its economy around. Chinese recovery, combined with regional reopening, means that Asia could have a good 2023.


An overarching concern, with major investment implications, will be the environment. Limiting global temperature rises to 1.5 Celsius will involve major structural changes to the way we live. Investors should anticipate these changes and can, via ESG investment, help facilitate some of them. We highlight two of our long-term investment themes in this annual outlook: the energy transition (to greener sources of power) and infrastructure. These, and our other seven long-term investment themes (also discussed), are likely to provide major investment opportunities in the years ahead. 

Portfolio management in 2023 needs to plan for this. All investors should consider the following three factors.


First, easing but continued inflation. Consider possible partial hedges against this in terms of asset classes (e.g. equities) or themes and sectors (e.g. some infrastructure).


Second, generally modest but positive return expectations. We forecast mid-single digit equity returns, for example. Investors seeking higher returns may want to look to alternative investments in private markets.


Third, risk. Despite our expectations of more stable financial markets in 2023, the world remains intrinsically risky. Prior thinking about potential financial implications can help protect portfolios.


I wish you a successful investing year. We are always here to assist. 


Christian Nolting 
Global CIO 

2023 Outlook Growth
2023 investment themes

Growth: stop and go

Mild recessions are expected in Europe and the U.S. in 2023 – but Chinese economic momentum will get stronger.

2023 Outlook Inflation
Theme #2

Inflation: lower and higher

Price rises will moderate, helped by central bank action. But the process may be slow and upside inflation risks remain.

2023 Outlook Bonds
Theme #3

Bonds: approaching equilibrium

After a volatile 2022, we have hopes of a more stable bond market in 2023. Yield and quality are not a contradiction anymore. 

2023 Outlook King Dollar
Theme #4

FX: King dollar – turnaround

Dollar strength may moderate with aggressive U.S. hiking cycle now sufficiently priced in. Euro could be one beneficiary.

2023 Outlook Stock Assets
Theme #5

Stocks: from TINA to TAPAs?

Valuations may make stocks seem comparatively inexpensive again but short-term risks remain and volatility could be high.

2023 Outlook Infrastructure
Theme #6

Infrastructure: the best is yet to come

The U.S. and Europe have announced enormous infrastructure investment plans, with a focus on sustainability and resilience.

2023 Outlook Alternatives
Theme #7

Alternatives: if you don't like beta, try alpha

Alternative investments can be a means of diversifying portfolios and providing a degree of protection against inflation.

2023 Outlook Risks
Theme #8

Risks: known unknowns

Known risks include geopolitical tensions and the fight for global technology leadership. Many others exist too.  

2023 Outlook Asia
Theme #9

Asia: hope in the Year of the Rabbit

Economic reopening and dynamism are shifting investors’ focus back to Asia, with a wide range of investment options.

2023 Outlook Energy transition
Theme #10

ESG: energy transition – climate is macro essential

Energy transition is a key part of ESG investment – environmental concerns have social and governance implications too.

Download our CIO Insights Annual Outlook

Our full CIO Insights report "Resilience versus recession" is available to download. Please refer to the Important Notes at the end of the report for disclosures and risk warnings.





In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved. Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Performance refers to a nominal value based on price gains/losses and does not take into account inflation. Inflation will have a negative impact on the purchasing power of this nominal monetary value. Depending on the current level of inflation, this may lead to a real loss in value, even if the nominal performance of the investment is positive. Investments come with risk. The value of an investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk. Readers should refer to disclosures and risk warnings at the end of this document. This document was produced in December 2022.

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