Q3 2023 | Global Macro Outlook

The long and winding road 

Resilience has always been viewed as a good thing. As asset allocators, it's our goal to construct portfolios that can withstand market events and do well in economic downturns. In this instance, however, resilience may not actually work in investors’ favor. The unexpected economic strength on display could—ironically—delay the path to recovery.

  • Recession postponed, not canceled

    Despite the aggressive monetary policy tightening we’ve seen so far, economic activity in developed economies has shown to be more resilient than expected amid a strong rebound in the services sector.

  • Inflation remains stickier than expected

    While headline inflation is easing, core inflation remains stubbornly high, and it isn’t just due to services inflation: Goods inflation is inflecting higher after a period of decline.

  • Unexpectedly hawkish central banks

    From the Bank of Canada to the Reserve Bank of Australia to Bank Negara Malaysia to the U.S. Federal Reserve, central banks around the world are proving to be more hawkish than expected.

  • A shifting geopolitical backdrop

    There are signs that we’re entering a new global regime, requiring a rethink of how risk assets respond to changes in the macro backdrop.

U.S. recession appears likely despite unexpected strength

Data year to date suggests that the U.S. economy had a better start to the year than expected. But we see this as a case of recession postponed rather than canceled.

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Three factors underpinning economic activity in the United States

The Chicago Fed's National Financial Conditions Index

Chart of Chicago Fed's National Financial Conditions Index. Historically, a positive value has been associated with tighter-than-average financial conditions and vice versa. The chart shows that the index remains in negative territotry as of early June 2023.

Source: Federal Reserve Bank of Chicago (Chicago Fed), Macrobond, Manulife Investment Management, as of June 16, 2023. It is not possible to invest directly in an index.

U.S. consumer spending financed by pandemic-related accumulated savings
Simple infographic showing that accumulated savings peak at US$2.1 trillion while cumulative drawdowns of those savings stodd at US$1.6 trillion as of March 2023.

Source: Federal Reserve Bank of San Francisco, Macrobond, Manulife Investment Management, as of June 16, 2023. Currency is shown in U.S. dollars.

U.S. consumer spending on services has outpaced spending on goods in the past year (%)
Chart comparing inflation-adjusted consumer expenditure on goods with consumer spending on services based on data available as of June 16, 2023. The chart shows that when adjusted for inflation, U.S. consumer spending on services has outstripped spending on goods since mid- to late-2022.

Source: U.S. Bureau of Economic Analysis, Macrobond, Manulife Investment Management, as of June 16, 2023. PCE refers to personal consumption expenditure.

“In our view, these tailwinds should dissipate as the lagged effects of monetary tightening filter through and the savings buffer that consumers have accumulated is run down.”

—Sue Trinh, Co-Head, Global Macro Strategy, Manulife Investment Management

Previous editions of Global Macro Outlook


The global macro strategy team provides global economic forecasts and research for the firm and sits within the multi-asset solutions team (MAST). The team’s analysis helps inform MAST’s positioning decisions as well as the investment views of other investment teams within Manulife Investment Management.

Additional viewpoints

Beyond the Fed’s hawkish “pause”: three macro elements to consider

The U.S. Federal Reserve kept rates steady at its June meeting. But looking deeper, there are implications for investors.
Read more

The Bank of Canada “unpauses”—what’s next?

After just a brief moment on the sidelines, the Bank of Canada has announced yet another 25-basis point rate hike. Our experts offer their take on what this means for the economy. Read more.
Read more

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