The Federal Reserve and other major central banks may not be able to start cutting interest rates in the foreseeable future because inflation will remain above official targets.
The analysts at the Swiss bank said in their outlook report that access to money will remain tight and markets will be volatile.
According to the bank, higher rates for longer will likely lead to a subdued performance of equity markets. Fixed income opportunities can be found if borrowing costs reach a peak.
The strategists wrote that "inflation is peaking in most countries as a result of decisive monetary policy action." It will remain above central bank targets in most major developed economies in the years to come.
They didn't forecast interest-rate cuts by any of the central banks next year.
Financial markets have been affected by a rise in borrowing costs.
The benchmark S&P 500 index has fallen by over 12% year-to-date as a result of the Fed hiking its benchmark rate by 75 basis points at each of the last four meetings
Credit Suisse warned that investors will have to wait until at least 2024 before the central bank lowers interest rates.
The strategists at the bank said that there would be two halves to the story.
The first half of the year is expected to be defined by high interest rates.
The higher rates for longer theme is expected to lead to a subdued equity performance. Sectors and regions with stable earnings, low leverage and pricing power are expected to fare better.
Market expectations for a Fed pivot to a less hawkish policy stance in the second half of the 20th century should support growth stocks because they benefit more from lower interest rates.
The bank said that once they get closer to a pivot by central banks away from tight monetary policy, they would shift towards interest-rate sensitive sectors.
The US will not slip into a recession next year due to the war in Ukraine and rising rates, according to Credit Suisse.
According to strategists, the UK, Eurozone, and Chinese economy should bottom out by mid-2023 and begin a weak, tentative recovery. The economic growth will be low in the coming years due to tight monetary conditions and the reset of geopolitics.
Over the next five years, the US gross domestic product is expected to grow at an average rate of just 1.5%.
Falling house prices will help the Fed tame inflation, but they also increase the risk of a long economic downturn.
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