Outlook 2023 – Caution: Heavy Fog
To say 2022 was a tumultuous year is an understatement. Equity markets dropped precipitously, interest rates rose at the fastest pace in decades and commodity prices gyrated in response to high inflation and geopolitical tensions. Clients’ portfolios experienced more volatility than usual because equities and bonds declined at the same time—a rare occurrence that has been observed only 2% of the time since 1926.
We expect this year to be less turbulent for markets, with inflation moderating and major central banks approaching the end of their tightening cycles. Yet there is still a fog of uncertainty facing investors. Will the US enter a recession or avoid it? How will the Russia-Ukraine war evolve? What are the implications of China’s abandonment of its “zero-COVID” policy?
Today, many leading indicators are pointing in opposite directions, and we believe it is important to convey this uncertainty to our clients unequivocally. Nonetheless, our analysis shows that our two key investment themes remain valid: US Preeminence and Staying Invested. In this uncertain environment, we recommend our clients’ portfolios be positioned at their customized strategic asset allocation, where they are designed to ride out volatility and provide staying power in the event of geopolitical disruptions.
In Section I of this report, we provide the rationale for assigning a 45−55% probability to the risk of a US recession in 2023. We evaluate the key arguments in favor of and against a US recession, and note that although a recession is possible, it is not inevitable. We explain why staying invested in such an uncertain environment is our recommended course of action for our clients. We spell out our one- and five-year expected returns and review our tactical tilts coming into 2023. We conclude Section I with the key risks to our outlook beyond the recession risks, primarily focused on geopolitical flare-ups and possible new COVID-19 waves originating from China.
In Section II, we provide a detailed review of our economic outlook for key developed and emerging market countries. Section III details our financial market outlook for these countries.
We invite you to read our views and investment recommendations in our 2023 Outlook report, Caution: Heavy Fog.
This material represents the views of the Investment Strategy Group (ISG) in the Consumer and Wealth Management Division of Goldman Sachs and is not a product of Goldman Sachs Global Investment Research (GIR). It is not research and is not intended as such. The views and opinions expressed by ISG may differ from those expressed by GIR, Goldman Sachs Asset Management, LP, or other departments or divisions of Goldman Sachs. Past performance is not indicative of future results which may vary.
This material has been approved for issue in the United Kingdom solely for the purposes of Section 21 of the Financial Services and Markets Act 2000 by GSI, Plumtree Court, 25 Shoe Lane, London, EC4A 4AU, United Kingdom; authorised by the Prudential Regulation Authority; and regulated by the Financial Conduct Authority and the Prudential Regulation Authority; by Goldman Sachs Canada, in connection with its distribution in Canada; in the United States by Goldman Sachs & Co. LLC Member FINRA/SIPC; in Hong Kong by Goldman Sachs (Asia) L.L.C.; in Korea by Goldman Sachs (Asia) L.L.C., Seoul Branch; in Japan by Goldman Sachs (Japan) Ltd; in Australia by Goldman Sachs Australia Pty Limited (ACN 092 589 770); in Singapore by Goldman Sachs (Singapore) Pte. (Company Number: 198502165W); in Dubai by Goldman Sachs International, in Germany by Goldman Sachs Bank Europe SE; in Switzerland by Goldman Sachs Bank AG; in Spain by Goldman Sachs Bank Europe SE, Sucursal en España; in Italy by Goldman Sachs Bank Europe SE, Succursale Italia; and in France by Goldman Sachs Bank Europe SE Succursale de Paris.
No part of this material may be (i) copied, photocopied or duplicated in any form, by any means, or (ii) distributed to any person that is not an employee, officer, director, or authorized agent of the recipient, without Goldman Sachs’ prior written consent. This does not constitute an offer or solicitation with respect to the purchase or sale of any security in any jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. This material is a solicitation of derivatives business generally, only for the purposes of, and to the extent it would otherwise be subject to, §§ 1.71 and 23.605 of the U.S. Commodity Exchange Act.
© 2023 Goldman Sachs. All rights reserved.
Goldman Sachs & Co. LLC is registered with the Securities and Exchange Commission (“SEC”) as both a broker-dealer and an investment adviser and is a member of the Financial Industry Regulatory Authority (“FINRA”) and the Securities Investor Protection Corporation (“SIPC”).
© 2025 Goldman Sachs. All rights reserved.