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Mackenzie Investments 2023 Mid-Year Outlook: Monetary Tightening, Fighting Inflation and Geopolitical Dynamics Will Continue to Impact Canadian Economy

TORONTO, June 14, 2023 – Although major economies have defied recession through the first half of 2023, Mackenzie Investments (“Mackenzie”) predicts a continued economic slowdown through the rest of the year in its 2023 Mid-Year Outlook. The report offers insights for financial advisors and investors on key trends impacting financial markets this year and provides an economic outlook for the balance of 2023. 

According to the firm’s investment professionals, central bank tightening, a decline in credit availability, sustained inflation and ongoing geopolitical events – will continue to impact economies in Canada and around the globe during the second half of the year.

“In our 2023 Outlook: The Blue Book, we predicted that inflation would be sticky and interest rates would remain high. We’ve started to see some of the fallout, particularly in the U.S., where a handful of medium-sized banks have failed in recent months,” said Steve Locke, CIO of Fixed Income and Multi-Asset Solutions at Mackenzie Investments. “As a result, credit creation will slow at the margins, making it more difficult for businesses and households to fund spending, the impact of which may ripple throughout the economy.”

In addition to inflationary pressures and financial tightening, geopolitical tensions have persisted during the first half of the year. Global growth is slowing down, especially when factoring in the temporary boost from China’s reopening and Europe’s energy-related recovery.

In its Mid-Year Outlook report, Mackenzie identifies three areas that it believes will continue to dominate capital markets throughout the rest of 2023:

Financial Tightening: Slowly at first, then all at once

The aggressive monetary policy tightening by central banks has started to show its impact in the first half of 2023, evidenced by the regional U.S. bank failures induced by deposit runs.

More generally, financial tightening is likely to pressure most banks to raise their lending standards. The availability of credit and liquidity should decline, and a higher cost of capital will persist. With inflation running high, investors should not expect an immediate shift to rate cuts.

“Achieving the two per cent inflation target remains the priority for central banks, which will encourage them to keep interest rates high throughout 2023. As a result, bond yields will remain elevated, creating pressure on consumers and business from higher interest rates on debts in the months ahead,” noted Mr. Locke.

Economic slowdown: Where the rubber meets the road

Global growth has been resilient in 2023 due to strong labour markets, robust consumer spending and continued post-Covid recovery, leading to a modest upward revision for global growth this year. However, Mackenzie believes that the rate of global growth will slow through the remainder of the year.

“Strength in the consumer sector and low unemployment have so far helped to offset the impacts of high inflation and interest rates, but growth has slowed, particularly in Canada as high consumer debt is negatively impacted by elevated interest rates,” said Lesley Marks, CIO of Equities and Mackenzie Investments.

“Despite mixed signals, we believe that the rapid central bank tightening and steadfast fight against inflation will continue to weigh on the economy, which will prove to be a headwind for risk assets like equities as the economic slowdown dampens earnings growth.”

Geopolitical dynamics: Amid continued conflict, fresh challenges arise

The ongoing war in Ukraine is resulting in higher food prices, agricultural shortages and energy supply shocks which is impacting inflation both in Europe and globally. This has increased the risk of European recession in 2024 as the European Central Bank may need to keep interest rates higher for longer.

However, China’s success in reopening their economy will help underpin growth in some emerging markets. The country is also playing a key geopolitical role in the de-dollarization theme, and while Mackenzie does not foresee the U.S. dollar imminently losing its global reserve currency status, there continues to be a push by some for competing reserve currency status over the longer-term, and that pressure is likely to continue.

“Geopolitical dynamics have continued to fuel economic concerns, with conflicts mounting and tensions rising between global powers. It will be important for investors to heed the potential of geopolitical risks in their portfolios as we navigate our way through to 2024,” concluded Ms. Marks.

To learn more about Mackenzie Investments and its 2023 Mid-Year Outlook, visit:


About Mackenzie Investments

Mackenzie Investments (“Mackenzie”) is a leading investment management firm with $190 billion in assets under management as of May 31, 2023. 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 May 31, 2023. For more information, visit


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