The risks of slowing growth and a mild recession remain elevated for the second or third quarter of 2023. However, corporate and consumer cash balances are in good shape, and debt burdens are modest, suggesting a more favorable market environment. In a moderate recession scenario, further declines in risky asset prices may be limited, due to the significant rerating of PE multiples that occurred during 2022. The expected path of inflation has improved, which should allow the Fed to slow the pace of rate hikes in the first half of 2023. With a less hawkish Fed and continued improvement in inflation, the dollar may have peaked, which could make international funds more attractive on a relative basis. The increasing importance of satellite assets in individual investor portfolios appears reasonable considering the disappointing returns of the 60/40 approach in 2022 and the failure of bonds to safeguard portfolios. An allocation to satellite assets, including private debt funds, commodities, and hedge strategies, led to greater returns, lower volatility, and improved diversification. Click "Market Outlook" to download our Q1 2023 investment outlook.