This month:

• The International Monetary Fund (IMF) has made a slight increase to its global growth outlook for 2023, due to “surprisingly resilient” demand in the U.S. and Europe, easing energy costs and the reopening of China’s economy, after Beijing abandoned its strict COVID-19 restrictions.
• The IMF still sees the pace of global growth falling this year compared with 2022, but by a smaller margin than it predicted in October. The IMF is now forecasting 2.9% growth for 2023, up from a 2.7% forecast in October and compared to 3.4% growth last year.
• Despite most global economic indicators looking negative, job vacancies and unemployment rates continue to buck the downward economic trend.
• Both the S&P 500 and the S&P ASX 200 performed very well during January. The S&P 500 rose by an impressive 6.18% for the month, while the Australian S&P 200 rose by a very similar amount (6.22%). In Australia, Value and Small caps were the best performing styles for January, although most styles performed very similarly for the month, with Quality being the only real underperformer. Globally, Growth was the best performer, with Momentum and Low Volatility being in negative territory.
• Within Fixed income markets, both government bonds and credit had a solid month. For January, the main Australian fixed interest index, the Bloomberg AusBond Composite 0+ Years Index gained 2.8%, while the Bloomberg AusBond Credit 0+ Years Index gained a respectable 2.2%.
• Global High Yield bonds as measured by the Bloomberg Barclays Global High Yield Total Return Index Hedged into AUD gained a very impressive 3.6% for the month.
• Given credit has performed well over the last three months, and given global economic indicators remain negative for 2023, Government bonds are becoming somewhat more attractive relative to credit.

Read the full Monthly Economic Wrap prepared by IOOF Research here.