We expect 2023 will be another challenging year, especially in the first half as the market continues to price in recession scenarios. While inflation has begun to decelerate, it remains elevated and there is still some uncertainty in the deceleration path. The rapid pace of monetary policy tightening has been a headwind for risk assets but the expected moderation in rate hikes should become less of an overhang as the effects of recent policy decisions begin to reflect in the economic data. As the year unfolds, the market’s ability to price in a mix of growth, inflation, and recession risk should become more clear and provide support for risk assets. As a result, we believe investors should remain defensive in this volatile inflationary market regime.