We expect near-term pain for equities, but medium-term gain

We continue to expect risky assets to struggle over the second half of this year, as major developed market (DM) economies slip into recessions. Meanwhile, we think DM sovereign bonds will rally; that’s partly due to safe-haven demand, and partly because we suspect that investors are underestimating how quickly and deeply central banks will cut rates (even if those rate cuts won’t actually come, in our view, until next year). But we anticipate that risky assets’ struggles will be fairly short lived: by 2024, we expect the global economy to be on the mend, and we think enthusiasm about AI technology, which has been a tailwind for the stock market this year, will provide a further boost to US equities in particular. And with central banks set, in our view, to be firmly in easing mode by then, we think sovereign bond yields will continue to fall as well.