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Inflation, Policy Tightening, Geopolitics: Mackenzie Investments 2023 Outlook Predicts Risks Amid Slower Economic Growth

TORONTO, ON – December 14, 2022 – Mackenzie Investments (“Mackenzie”) is forecasting a slowing economy that will shift the risks facing investors in the year ahead according to its 2023 Outlook: The Blue Book. The report offers insights for financial advisors and investors on trends shaping Canadian and global economies and the impact on capital markets.

Despite the view that inflation has peaked, achieving the central banks’ target inflation rate is likely to take longer, implying that higher interest rates will remain persistent for longer. 

Mackenzie anticipates much of the turmoil that dominated financial markets in 2022 will abate in 2023 as concerns shift from interest rates and inflation towards the impact of an economic slowdown.  Mackenzie believes that this backdrop could bring a return to normalcy in the rates market, followed by an equity rebound later in the year.

“The ‘goldilocks’ era of investing, where low inflation, low unemployment and moderate economic growth kept the economy from overheating or becoming too cool, has shifted and it’s clear that inflationary pressures will be sticking around. As a result, central bankers have been forced to increase rates rapidly, sending both stock and bond prices lower, and leaving very few places for investors to hide in 2022,” said, Steven Locke, CIO of Fixed Income and Multi-Asset, Mackenzie Investments.

“Heading into 2023, we anticipate more volatility due to tighter monetary policy, geopolitical risks, and slower economic growth. However, we are hopeful the worst is behind us in the bond market and that there will be a broad-based recovery in equities towards the end of the year.”

In its 2023 Outlook, Mackenzie forecasts three key themes that will continue to dominate capital markets and impact investors in the year ahead:

Financial tightening: No pain, no gain

After central bankers hit the economy with the largest rate hikes in decades to combat soaring inflation in 2022, the lagged effect of monetary policy means the impact of higher borrowing costs will be felt well into the next year. Mackenzie believes that if central banks are forced to maintain policy rates at these levels to rein in inflation, tighter financial conditions will be a headwind for households and business fundamentals in 2023.

“Unfortunately, the Canadian economy is likely going to feel the impact of these monetary policy decisions well into 2023. Higher household debt has increased overall sensitivity to rising yields, making Canadian households among the most rate-sensitive globally,” noted Mr. Locke.

Economic slowdown: How broad, how deep?

The report notes that it is not a question of whether there will be an economic slowdown but whether the landing will be soft or hard, and how long it will last. If the slowdown is dramatic, there is the potential for a reversal of policy rates, which may in turn boost equity market sentiment.

“The path to a soft landing is the reduction of job openings, without destroying jobs. This scenario allows the consumer to continue to shore up the economy and offset a slowing business environment,” said Lesley Marks, CIO of Equities, Mackenzie Investments.

“Despite the clouds building in the economic backdrop, we believe that equity markets will eventually look through the valley of an economic slowdown towards the next business cycle. This could set up for a broad-based equity recovery later in the year.”

Geopolitical headwinds unlikely to blow over

With the Russian invasion of Ukraine drawing-out longer than initially expected and threatening Europe’s energy and food supplies, and the U.S. continuing its tough-on-China policies, Mackenzie forecasts geopolitical risks will continue to loom large in 2023. The sustained conflict in Ukraine poses challenges for the European economy but there is renewed hope that China will embark on a path to ease zero-COVID policies, leading to potential for an upside surprise in economic growth in Asia.  

“Heightened geopolitical risks leads to a recommendation for investors to take a more defensive position in equities, favouring dividend-paying companies and higher-quality businesses that exhibit lower volatility,” concluded Ms. Marks.

To learn more about Mackenzie Investments and its 2023 Outlook, visit here.

About Mackenzie Investments

Mackenzie Investments (“Mackenzie”) is a leading investment management firm with $192.9 billion in assets under management as of November 30, 2022.  Mackenzie provides investment solutions and related services to more than one million retail and institutional clients through multiple distribution channels. Founded in 1967, Mackenzie is a global asset manager with offices across Canada as well as in Boston, Dublin, London, Hong Kong and Beijing. Mackenzie is a member of IGM Financial Inc. (TSX: IGM), one of Canada's premier financial services companies with approximately $257 billion in total assets under management and advisement as of November 30, 2022. For more information, visit

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