Our latest forecast changes include expectations for:
.
Australia’s unemployment rate to rise this year as financial conditions tighten, and headline inflation to fall to 4.25% by the end of 2023 as higher interest rates dampen demand.
China’s postpandemic recovery to be uneven, however with an expected increase in consumption, we foresee inflation averaging 2.5% over 2023.
The U.S. Federal Reserve Bank to continue tightening its monetary policy and raise its interest rate target to a range of 5.5%–5.75% from its current target of 4.75%–5%.
The views below are those of the global economics and markets team of Vanguard Investment Strategy Group.
Vanguard’s outlook for financial markets
Our 10-year annualised nominal return and volatility forecasts are shown below. They are based on the December 31, 2022, running of the Vanguard Capital Markets Model® (VCMM). Equity returns reflect a 2-point range around the 50th percentile of the distribution of probable outcomes. Fixed income returns reflect a 1-point range around the 50th percentile. More extreme returns are possible.
Return projection
Median volatility
Australian equities
4.0% - 6.0%
21.5%
Global ex-Australia equities (unhedged)
5.4% - 7.4%
19.6%
Australian aggregate bonds
3.8% - 4.8%
5.5%
Global ex-Australia bonds (hedged)
4.0% - 5.0%
4.7%
Notes: These probabilistic return assumptions depend on current market conditions and, as such, may change over time. Source: Vanguard Investment Strategy Group.
Region-by-region outlook
Australia
Australia’s central bank has paused its rate-hiking cycle, and its data-dependent approach suggests the cycle may have peaked. The Reserve Bank of Australia (RBA) said it expects that “some further tightening of monetary policy may well be needed” to ensure that inflation returns to its 2%–3% target.
Several reasons exist, however, to believe that the RBA may have reached its terminal interest rate. For one, although the unemployment rate remains near a multidecade low, Australia’s labour market isn’t as tight as those of most developed-market peers. Wages rose by 0.8% in the fourth quarter and 3.3% for all of 2022. We expect the unemployment rate, which was unchanged at 3.5% in March, to rise this year as financial conditions tighten.
Also supporting the RBA’s pause, inflation appears to have peaked. We expect headline inflation to fall to around 4.25% by the end of 2023, as higher interest rates dampen demand, and to fall to the RBA’s target band of 2%–3% in 2024.
We continue to expect GDP growth of 1%–1.5% for all of 2023. We assign a 50% probability of recession over the next 12 months, up from 40% last month, as our proprietary index of leading indicators reflects growth below trend.
China
The latest data on GDP, retail sales, and exports portray a Chinese economy in full bounce-back mode in the months after its postpandemic reopening. Given the strength in first-quarter data released Tuesday, April 18, we have increased our outlook for China’s full-year economic growth from 5.3% to 6.4%. With consumer confidence on the mend and credit growth accelerating, there is scope for a further pickup in activity over the coming quarters. China’s official target is for the economy to grow “around 5%” in 2023.
We expect China’s postpandemic recovery to be uneven, however. COVID-sensitive services sectors have led the rebound since the beginning of the year, joined more recently by the housing and export sectors. But manufacturing remains sluggish and domestic demand weak
We expect inflation to average 2.5% in 2023, below the People’s Bank of China’s 3% target
We don’t expect further People’s Bank of China cuts to the reserve requirement ratio after a 25-basis-point cut for large and medium-size banks announced March 17. We expect any easing in the medium term to be targeted, such as for the benefit of the manufacturing sector and green investment.
United States
Since stresses in the U.S. banking system became apparent with the closure of Silicon Valley Bank on 10 March, financial markets have been pricing in Federal Reserve interest rate cuts. We don’t see enough of a bank stress-induced impact on credit conditions to warrant a pause in the Fed’s inflation-fighting campaign. We’re still most closely watching the strength of the labor market, the potential for accelerated wage gains, and the stickiness of core inflation.
We expect the Fed to raise its rate target by another 75 basis points (0.75 percentage point) this year, to a range of 5.5%–5.75%. We don’t foresee rate cuts before 2024.
A combination of fewer job vacancies and more unemployment likely will be required to keep wage growth in check. As more restrictive financial conditions take hold, we foresee the unemployment rate rising to 4.5%–5% (from 3.5% in March) by the end of 2023.
We continue to expect 2023 U.S. growth of around 0.75%. A recession in the second half of the year remains our base case.
U.S. home prices likely will decline 5% on a year-over-year average basis in the second half of 2023. As affordability normalises, however, housing should act as an economic stabiliser.
Euro area
Vanguard continues to expect core inflation to peak in a range of 5.5%–6% in the next few months before fading in the second half of the year as the effects of higher interest rates work their way through the economy. We foresee core inflation averaging 4.5% in 2023 and ending the year around 3.3%—still solidly above the European Central Bank’s (ECB’s) 2% target.
Given these conditions, we foresee the ECB raising its deposit rate to a range of 3.75%–4% from the current 3%, with no rate cuts in 2023. Markets are pricing in a terminal rate in a range of 3.5%–3.75%, or 25 basis points lower than our view, and have moved toward our view of no rate cuts by year-end. The ECB’s next policy announcement is scheduled for Thursday, May 4.
Our base case for the broad economy remains a recession in the second half of the year and full-year GDP growth around 0.5%. Although activity data have been somewhat stronger than expected, we see a likely further tightening in both financial and credit conditions as a strong opposing force.
United Kingdom
We continue to expect core inflation to fall below 4% by the end of 2023 as the effect of higher interest rates and the benefits of lower energy prices work through the economy.
Vanguard’s expectation is that the Bank of England (BOE) will need to raise the bank rate again when it meets in May. We expect the BOE to raise the bank rate to 4.5% and leave it there for the rest of 2023.
Our business-cycle view is unchanged. We continue to expect recession in 2023, with full-year GDP falling by about 1%. We foresee growth of about 0.6% in 2024.
Emerging markets
Increasing business and consumer confidence, as measured by surveys that feed into Vanguard’s proprietary index of leading economic indicators, suggests continued economic resilience in emerging markets, especially emerging Asia. We recently increased our forecast for 2023 emerging markets GDP growth from about 3% to about 3.25% and see risks skewed toward further upside, especially should measures of optimism translate into real economic data.
Our forecast for emerging markets GDP growth remains below consensus, given our expectation of slower global growth later in 2023.
Vanguard's global economics and markets team April 2023 vanguard.com.au
Hamish has been working within the Financial Services industry for over 20 years and has been providing holistic financial advice to clients for over 16 years.
Prior to the establishment of Adelaide Private Wealth in 2014 Hamish worked as a Financial Adviser with one of Australia’s leading Banks after which he worked with many of his existing clients as a Principal in one of Adelaide’s larger Genesys Wealth Advisers businesses.
Over the years Hamish has become a specialist in the areas of portfolio management, personal protection, retirement planning and is an Accredited Direct Equities and SMSF Adviser. He is passionate about partnering with clients to manage their financial affairs effectively, giving them the confidence and time to pursue the lifestyle they wish.
Hamish holds a Diploma of Financial Advice and a Master of Commerce with a major in Financial Planning. He is also a member of the Royal Association of Justices of South Australia Inc and a member of the Association of Financial Advisers (AFA).
Hamish lives in Goodwood with his wife and is a proud father of three young boys. He enjoys playing golf, following AFL, reading and gardening in his spare time.
Ben Newbold
Ben Newbold
Financial Adviser / Director
Ben has 21 years of experience in the financial planning industry. He has worked for large institutional banks, boutique advice firms and has been delivering holistic advice solutions to clients for more than 19 years.
Ben prides himself on exceeding expectations and providing quality education to his clients around their financial matters, enabling them to make sound and informed decisions.
Ben provides expert and detailed advice in the areas of superannuation, retirement, wealth creation, insurance and Centrelink. He also provides specialist advice in Aged Care strategies to help maximise benefits and minimise aged care fees.
Highly qualified in financial matters Ben holds a Diploma of Financial Planning, a Bachelor of Banking and International Finance and is both an Accredited Direct Equity and SMSF Adviser. He is passionate about using the knowledge he has built up to help clients get to where they want to be.
Outside of work Ben is heavily involved in sport, and is a proud Life Member of both Unley Football Club and Sacred Heart Old Collegians Cricket Club. He enjoys spending any spare time with his wife and chasing after their three children.
Mark Humphris
Mark Humphris
Financial Adviser / Director
Mark has been involved in the financial services industry for 21 years and has a wide array of experiences that he draws on in giving great advice. Mark believes strongly that personalised advice and guidance together with a very high attention to detail provides clients with the best opportunity to meet their financial and lifestyle goals.
Mark is a strategic thinker and specialises in helping clients initially review and build the right asset and debt structures, before providing detailed advice in the areas of superannuation and investments, cashflow management, family protection and insurances and Centrelink strategies. Mark has had great success in helping people identify and implement opportunities to adjust their cashflow, assets and liabilities to prepare and transition into a great retirement without any financial stresses.
Mark holds a Diploma of Financial Planning, Bachelor of Business (Banking and Finance) and is Listed Security accredited.
When not at work Mark spends time with his young family, enjoys attending sporting events or a quick getaway to the family farm on weekends.
General Advice Disclaimer
Information provided on this website is general in nature and does not constitute financial advice.
Adelaide Private Wealth will endeavour to update the website as needed. However, information can change without notice and Adelaide Private Wealth does not guarantee the accuracy of information on the website, including information provided by third parties, at any particular time.
Every effort has been made to ensure that the information provided is accurate. Individuals must not rely on this information to make a financial or investment decision. Before making any decision, we recommend you consult a financial adviser to take into account your particular investment objectives, financial situation and individual needs.
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Terms & Conditions - Hamish Zerbe
This website is operated by Hamish Zerbe & Associates Pty Ltd, ABN 40 573 262482. We are an authorised representative of Count Financial Limited, an Australian Financial Services Licensee. These are the terms and conditions for use of this site and access to the information contained on this site.
We and our authorising licensee:
do not give any warranty or make any representation as to the accuracy, reliability, completeness or security of the information contained on this site and as to changes in circumstances after the date of publication that may impact on the accuracy of the information;
may change and update the information from time to time;
make no representation in relation to, and are not responsible in any way, for the content of any other site you access via this site; and
own the copyright in the information on this site.
Users must not use or reproduce any of the trademarks that appear on this site.
Users of this site must not:
do anything to alter or modify the information on this site;
use the material on this site for any purpose other than as a source of information for personal use unless authorised to the contrary;
distribute, copy or otherwise reproduce in any way any of the material available from this site unless it is expressly authorised;
post any material which is defamatory, in breach of copyright, in breach of the Trade Practices Act or otherwise in any way unlawful or inappropriate.
Users can print a hard copy of material on this site for their personal use only other than material where this is prohibited by a notice to that effect on this site.
The information contained on this site is made available to residents of Australia and its territories and is not intended to be a recommendation, offer or invitation to take up securities or other investments.
We and our authorising licensee are not liable in any way to any person for any loss, damage, cost or expense incurred as a result of the material contained on this site or from unauthorised access to, or any misuse of this site including, without limitation, any negligence by us.
All references on this site to “$” or “dollars” are references to Australian currency unless otherwise stated.
Users of this site agree to indemnify us and our authorising licensee from all liability, cost and expense, (including legal fees) arising directly or indirectly from the use or distribution by any person of material placed on the site by the user or from the alteration, modification of or addition to material on the site by the user.
We and our authorising licensee do not endorse and are not responsible for information, feedback, questions or comments placed on this site by third parties. We can reproduce, use, disclose and distribute the information to others in our absolute discretion.
Links to other sites are provided for your convenience only. Any such links do not constitute or imply endorsement or recommendations of any other company, product or service or any affiliation between us and other organisation (unless otherwise expressly stated).
You consent to us monitoring your use of this site.
Terms & Conditions - Ben Newbold
This website is operated by Ben Newbold & Associates Pty Ltd, ABN 82782076621. We are an authorised representative of Count Financial Limited, an Australian Financial Services Licensee. These are the terms and conditions for use of this site and access to the information contained on this site.
We and our authorising licensee:
do not give any warranty or make any representation as to the accuracy, reliability, completeness or security of the information contained on this site and as to changes in circumstances after the date of publication that may impact on the accuracy of the information;
may change and update the information from time to time;
make no representation in relation to, and are not responsible in any way, for the content of any other site you access via this site; and
own the copyright in the information on this site.
Users must not use or reproduce any of the trademarks that appear on this site.
Users of this site must not:
do anything to alter or modify the information on this site;
use the material on this site for any purpose other than as a source of information for personal use unless authorised to the contrary;
distribute, copy or otherwise reproduce in any way any of the material available from this site unless it is expressly authorised;
post any material which is defamatory, in breach of copyright, in breach of the Trade Practices Act or otherwise in any way unlawful or inappropriate.
Users can print a hard copy of material on this site for their personal use only other than material where this is prohibited by a notice to that effect on this site.
The information contained on this site is made available to residents of Australia and its territories and is not intended to be a recommendation, offer or invitation to take up securities or other investments.
We, our authorising licensee are not liable in any way to any person for any loss, damage, cost or expense incurred as a result of the material contained on this site or from unauthorised access to, or any misuse of this site including, without limitation, any negligence by us.
All references on this site to “$” or “dollars” are references to Australian currency unless otherwise stated.
Users of this site agree to indemnify us and our authorising licensee from all liability, cost and expense, (including legal fees) arising directly or indirectly from the use or distribution by any person of material placed on the site by the user or from the alteration, modification of or addition to material on the site by the user.
We and our authorising licensee do not endorse and are not responsible for information, feedback, questions or comments placed on this site by third parties. We can reproduce, use, disclose and distribute the information to others in our absolute discretion.
Links to other sites are provided for your convenience only. Any such links do not constitute or imply endorsement or recommendations of any other company, product or service or any affiliation between us and other organisation (unless otherwise expressly stated).
You consent to us monitoring your use of this site.
Terms & Conditions - Mark Humphris
This website is operated by Strathmore Nominees Pty Ltd, ABN 65 218 962 870. We are an authorised representative of Count Financial Limited, an Australian Financial Services Licensee. These are the terms and conditions for use of this site and access to the information contained on this site.
We and our authorising licensee:
do not give any warranty or make any representation as to the accuracy, reliability, completeness or security of the information contained on this site and as to changes in circumstances after the date of publication that may impact on the accuracy of the information;
may change and update the information from time to time;
make no representation in relation to, and are not responsible in any way, for the content of any other site you access via this site; and
own the copyright in the information on this site.
Users must not use or reproduce any of the trademarks that appear on this site.
Users of this site must not:
do anything to alter or modify the information on this site;
use the material on this site for any purpose other than as a source of information for personal use unless authorised to the contrary;
distribute, copy or otherwise reproduce in any way any of the material available from this site unless it is expressly authorised;
post any material which is defamatory, in breach of copyright, in breach of the Trade Practices Act or otherwise in any way unlawful or inappropriate.
Users can print a hard copy of material on this site for their personal use only other than material where this is prohibited by a notice to that effect on this site.
The information contained on this site is made available to residents of Australia and its territories and is not intended to be a recommendation, offer or invitation to take up securities or other investments.
We and our authorising licensee are not liable in any way to any person for any loss, damage, cost or expense incurred as a result of the material contained on this site or from unauthorised access to, or any misuse of this site including, without limitation, any negligence by us.
All references on this site to “$” or “dollars” are references to Australian currency unless otherwise stated.
Users of this site agree to indemnify us and our authorising licensee from all liability, cost and expense, (including legal fees) arising directly or indirectly from the use or distribution by any person of material placed on the site by the user or from the alteration, modification of or addition to material on the site by the user.
We and our authorising licensee do not endorse and are not responsible for information, feedback, questions or comments placed on this site by third parties. We can reproduce, use, disclose and distribute the information to others in our absolute discretion.
Links to other sites are provided for your convenience only. Any such links do not constitute or imply endorsement or recommendations of any other company, product or service or any affiliation between us and other organisation (unless otherwise expressly stated).
You consent to us monitoring your use of this site.
Disclosure - Hamish Zerbe
Hamish Zerbe and Hamish Zerbe & Associates Pty Ltd, ABN 40 573 262 482, trading as Adelaide Private Wealth are Authorised Representatives of Count Financial Ltd ABN 19 001 974 625 AFSL No. 227232 which is 85% owned by CountPlus Limited ABN 111 26 990 832 (CountPlus) of Level 8, 1 Chifley Square, Sydney 2000 NSW and 15% owned by Count Member Firm Pty Ltd ACN 633 983 490 of Level 8, 1 Chifley Square, Sydney 2000 NSW. CountPlus is listed on the Australian Stock Exchange. Count Member Firm Pty Ltd is owned by Count Member Firm DT Pty Ltd ACN 633 956 073 which holds the assets under a discretionary trust for certain beneficiaries including potentially some corporate authorised representatives of Count Financial Ltd. The information on this web page is not advice and is intended to provide general information only. It does not take into account your individual needs, objectives or personal circumstances.
Disclosure - Ben Newbold
Ben Newbold and Ben Newbold & Associates Pty Ltd, ABN 82 782 076 621, trading as Adelaide Private Wealth are Authorised Representatives of Count Financial Ltd ABN 19 001 974 625 AFSL No. 227232 which is 85% owned by CountPlus Limited ABN 111 26 990 832 (CountPlus) of Level 8, 1 Chifley Square, Sydney 2000 NSW and 15% owned by Count Member Firm Pty Ltd ACN 633 983 490 of Level 8, 1 Chifley Square, Sydney 2000 NSW. CountPlus is listed on the Australian Stock Exchange. Count Member Firm Pty Ltd is owned by Count Member Firm DT Pty Ltd ACN 633 956 073 which holds the assets under a discretionary trust for certain beneficiaries including potentially some corporate authorised representatives of Count Financial Ltd. The information on this web page is not advice and is intended to provide general information only. It does not take into account your individual needs, objectives or personal circumstances.
Disclosure - Mark Humphris
Mark Humphris and Strathmore Nominees Pty Ltd, ABN 65 218 962 870, trading as Adelaide Private Wealth are Authorised Representatives of Count Financial Ltd ABN 19 001 974 625 AFSL No. 227232 which is 85% owned by CountPlus Limited ABN 111 26 990 832 (CountPlus) of Level 8, 1 Chifley Square, Sydney 2000 NSW and 15% owned by Count Member Firm Pty Ltd ACN 633 983 490 of Level 8, 1 Chifley Square, Sydney 2000 NSW. CountPlus is listed on the Australian Stock Exchange. Count Member Firm Pty Ltd is owned by Count Member Firm DT Pty Ltd ACN 633 956 073 which holds the assets under a discretionary trust for certain beneficiaries including potentially some corporate authorised representatives of Count Financial Ltd. The information on this web page is not advice and is intended to provide general information only. It does not take into account your individual needs, objectives or personal circumstances.
