OUTLOOK THEME & KEY FEATURES IN FORECAST

UNITED STATES

• Further slowdown due to tighter lending conditions resulting from steep interest rate hikes
• Inflations have proven to be stickier than previously anticipated
• The job market remains strong but hiring pace has been slowing down
• The US monetary policy tightening to be concluded by 3Q2023 ▪ Soft landing remains possible, but its probability has reduced on greater downside risk

EUROPE & UNITED KINGDOM

• Euro Area narrowly avoided recession in 2022 despite conflicts, inflation, and uncertainties
• Euro Area manufacturing remains sluggish, unlikely to improve soon
• UK inflation is the highest among developed market (DM) peers
• UK labour market tight with high job vacancies, low unemployment
• The BOE and ECB to tighten its monetary policy but both are seen at the tail end of hiking cycles

JAPAN

• Japan's economy remains subdued but is expected to improve in 2023
• The labour market improves, but wage growth remains sluggish
• Inflation trending higher, driven by cost-push factors

CHINA

• Economy grows but consumer spending remains cautious
• Households save more, cautious spending, downside risks to growth
• Need to address the poor confidence and the situation surrounding the housing market

MALAYSIA

• Malaysian economy exceeded expectations in 1Q2023, driven by domestic demand
• Domestic demand to drive Malaysia’s growth on improving labour market
• External factors to remain weak hence impacting exports

FOREX

• The prospects for Fed cuts in early 2024 sustain our outlook for weaker USD
• Major and emerging market (EM) currencies anticipated to benefit from USD weakness in 2H2023
• Short term risks prevail due to lack of clarity as to when the turn to a dovish Fed will occur

FIXED INCOME

• Our Fed outlook places positive spin for bond markets ahead
• Bond market will lead the Fed; 10Y-2Y UST spread may flip into positive territory by early 2024 or possibly earlier

Source: AmInvest Research - 16 Jun 2023