Tactical ETF 4Q22 Market Review & Outlook

January 10, 2023 — Our outlook is for the global economy to bend but not break, with low but positive growth in the 1% to 2% range. Growth will be weighed down by a modest EU contraction and flat US growth but bolstered by China’s ~4% growth after reopening, easing supply side constraints, and some inflation relief for consumers. The evolving slowdown should be accompanied by a substantial decrease in inflation during the year, but still above average (3% in the US). This should lead to a Fed pause in Q1 with futures implying 50 basis points of more hiking, a pause at 5%, and a year-end rate of 4.5%. From an asset allocation perspective, this outlook is more positive for fixed income, given yield carry and a Fed pause, but it suggests caution for equities given deteriorating macro fundamentals.