Although government bond yields have already risen sharply this year, we think that they will continue to increase as central banks press ahead with monetary tightening this year and next. Higher yields will, in our view, weigh further on developed market equities; our base case forecast is that these make very limited gains over 2022/23 and we suspect there is a good chance of a much worse outcome than this, especially in the tech-heavy US stock market. We doubt emerging market equities will fare much better, given our downbeat forecasts for most commodity prices. Meanwhile, generally low credit spreads and our forecast for slowing economic growth means we see little upside for corporate bonds, either.
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