We expect 2013 to be another year of weak growth, low inflation and further divergence between the US and other advanced economies. The biggest problems will continue to be in the euro-zone, where the recession is likely to deepen. The UK may stage a feeble recovery, at best, as should Japan. By comparison, prospects are much better for the US, provided it avoids the full impact of the "fiscal cliff". But growth in the BRICs may also disappoint. (For more details, see our regional and country services.) After a strong performance in 2012, stock markets are likely to have a tougher time in 2013. An aversion to risk should result in the renewed underperformance of emerging market equities relative to developed markets, despite more favourable economic fundamentals. Bonds may also struggle. Admittedly, yields on high-grade government bonds appear set to remain low. But spreads on lesser-rated credits could creep up. We expect the prices of most commodities to come under pressure, with the notable exception of gold. Finally, we forecast the euro to drop sharply.
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