The global economy continues to slow as we near the end of 2022. The last time that the world experienced a central bank confluence of growth-restricting policies was in 1982, when a global recession was induced. There is good reason to expect the same in 2023. The weak points include China with Covid policies that hurt their economy, and Europe, hindered by slowing global trade and the impact of the Russian war on Ukraine. The U.S. economy is more insulated and is relatively stronger than the other major economies.  In December, we maintained our twelve-month forward outlook for the U.S. economy of six months of Recession followed by six months of Stagnation.

The Chinese economy advanced 3.9% year over year in Q3.1 China’s annual inflation fell to 1.6% in November, from 2.1% in the prior month.2 China’s surveyed urban unemployment rate increased to a six-month high of 5.7% in November, amid ongoing COVID-19 restrictions.3 Exports from China plunged 8.7% year over year in November.4 The Euro Area economy expanded 2.3% year-on-year in the third quarter. Among the bloc’s biggest economies, Germany expanded 1.3%, France 1%, Italy 2.6%, and Spain 3.8%.5 Consumer price inflation in the Euro Area was revised to 10.1% year-on-year in November. Energy prices rose 34.9%, the largest contributor.6 The unemployment rate in the Euro Area fell to a record low of 6.5% in October, falling in Spain and Italy while remaining steady in France and Germany.7

The U.S. economy grew an annualized 2.9% in Q3 2022. The biggest positive contribution came from net trade, as imports sank while exports rose.8 The annual inflation rate in the U.S. slowed for a fifth straight month to 7.1% in November.9 The Canadian economy expanded 0.7% in Q3 2022, a fifth consecutive quarter of growth.10 Canada posted a trade surplus as exports rose by 1.5%, with growth observed in 8 out of 11 industries.11 Canada’s annual inflation rate was 6.9% in October, as continued interest rate hikes by the Bank of Canada lifted mortgage costs by 11.4% annually, the highest since February 1991.12 The unemployment rate in Canada was at 5.1% in November.13

A rally on the last trading day of November capped off a month of relief for the market in the form of easing inflation and optimism surrounding a potential slowing pace of U.S. rate hikes. The S&P 500 posted its second consecutive month of gains, with a total return of 5.6%. The S&P Mid Cap 400 and S&P Small Cap 600 were up 6.1% and 4.2%, respectively. With Treasury yields declining as a result of slowing inflation, U.S. fixed income index performances were positive across the board. Canadian equities continued to rise in November. The S&P/TSX Composite increased by 5.5%. The S&P Europe 350 turned in a 7.1% gain, with all its constituent countries ending the month in positive territory. The U.K. and France were the biggest contributors to the benchmark’s gains with contributions of 1.7% and 1.3%, respectively. The S&P Pan Asia BMI surged 13.6% in November with China contributing most to the gains.

In December, our optimization process was unable to identify portfolio solutions for any of our Model Risk Thresholds. With this guidance, we maintained our asset allocation, including the twenty percent cash position across all models.

Price growth has likely reached a point where it is destructive to volume growth The Fed aims to attain monetary policy that is sufficiently restrictive to return inflation to 2%. Rate hikes by central banks take an estimated 6-12 months to impact the economy. Companies currently face a worsening macro picture and risks to corporate profit margins due to ongoing higher costs and less ability from consumers to digest price increases. Energy prices will be one on the greatest challenges. Russian supply cuts in February to Western countries that have imposed a price cap on them will cause the energy market to flare up again in 2023. We are currently positioned for a recession in the U.S. in the next two quarters. Our approach to portfolio management is nimble, opportunistic, and deliberate in identifying asset classes that are best placed to generate returns in a new world order. Our focus is on protecting portfolios from downside risk, and we believe that our investment process is working to achieve that goal.


Deborah Frame, President and CIO


1 Trading Economics. China Trade. October 24, 2022.

2 Trading Economics. China Inflation. December 9, 2022.

3 Trading Economics. China Unemployment Rate. December 15, 2022.

4 Trading Economics. China Trade. December 15, 2022.

5 Trading Economics. Europe GDP Growth. December 7, 2022.

6 Trading Economics. Europe Inflation. December 16, 2022.

7 Trading Economics. Europe Unemployment Rate. November 30, 2022.

8 Trading Economics. U.S. GDP Growth. December 1, 2022.

9 Trading Economics. U.S. Inflation. December 13, 2022.

10 Trading Economics. Canadian GDP Growth. November 29, 2022.

11 Trading Economics. Canada Trade. December 6, 2022.

12 Trading Economics. Canada Inflation. November 16, 2022.

13 Trading Economics. Canada Unemployment. December 2, 2022.


Index return data from Bloomberg and S&P Dow Jones Indices Index Dashboard: U.S., Canada, Europe, Asia, Fixed Income. November 30, 2022. Index performance is based on total returns and expressed in the local currency of the index.