What awaits in 2023?
All are anxiously trying to fathom what a Recession — the widely expected repercussion of the unprecedented inflationary sharp surge and concomitant interest rate spike
The year 2022 has just passed and along with it is a rainbow of experiences — some good that we savor, and some bad that we would rather forget.
As 2023 beckons, like the beginning of a new story, the pages of our lives will slowly unfold. My curiosity is piqued as I wonder what God’s design for the world will be like in the new year and how my own tale would evolve.
Allow me to share what could await in 2023.
On the economic front, the likely mega issue that will continue to confront, confound and hound the world, from the economists, central bankers, financial analysts and institutional investors, to the simple small-time savers and consumers, is if indeed the much dreaded big “R” will come to fruition. All are anxiously trying to fathom what a Recession — the widely expected repercussion of the unprecedented inflationary sharp surge and concomitant interest rate spike never before experienced in such a rapid manner — will mean for all of us. Since I do not profess to be an economist but merely a curious bystander eager to soak in commentaries from an array of published sources, I looked up research pieces on the economic forecasts for 2023 with varying perspectives. A precis of selected 2023 global forecasts (as of November 2022):
•Goldman Sachs believes that global growth will further slow to 1.8 percent vs. 2022’s 2.9 percent but the US will NOT dip into recession and will be able to eke out growth of 1 percent. The Fed, however, will cautiously continue to raise interest rates, albeit at a slower pace to put a lid on inflation fears with rates peaking at about 5.25 percent. Europe, however, will be a different story as the Russia-Ukraine real life and death drama dangerously marches on. If not yet already then most definitely in 2023, Europe will see negative growth of — 0.1 percent vs. 2022’s positive 3.1 percent due largely to the pronounced energy bills arising from the truncated oil supply caused by the Ukrainian hostilities.
The laggards will be Russia at — 1.3 percent and the UK at — 1.2 percent. Highly populous China and India will lead the way, on the other hand, as they are forecasted to register a growth of 4.5 percent and 5.9 percent, respectively. The former, however, will be dragged down, particularly by its overheated property sector and US — imposed restrictions on chip exports. And if I might add a possible troublesome circumstance for China that could seriously stall any growth momentum, at least in the first half, it is the recent explosion of covid cases following the abrupt discarding of their zero covid policy. The flipside though is that as the cases subside, the supply chain disruptions will likely abate diffusing supply-related inflationary pressures.
•Blackrock interestingly has a less sanguine view of 2023. They don’t see a return in the near term to the placid era of 2 percent inflation, low-interest rates, stable production, loose monetary conditions and enhanced globalization. Instead, they see a continuum of comparatively elevated inflation and interest rates vs the pre-covid period; a mild recession in the developed economies; retarded production and supply chains due to an aging workforce; weak corporate earnings; and fragmented global cooperation due to geo-political tensions.
As a consequence of these bearish concerns, Blackrock is underweight on equities — they believe the markets have not yet fully priced in the damage wrought by the recent past and the attendant lingering and highly likely new macro risks. On the other hand, they espouse being overweight on short-term government and prime private corporate debt in preparation for a relatively optimistic expectation that longer-term fixed income and equity investment conditions will improve towards the latter part of 2023 as Fed rate adjustments plateau. Keeping your powder dry for now until better times.