2023 Expectations: Market and Macro Outlook
As the previous year came to an end, almost all major financial institutions published their 2023 macroeconomic outlook. Overall, most institutions said they wanted the market to recover. As far as economics is concerned, however, in developed countries, particularly the US and the Eurozone, the situation is particularly worrying. JP Morgan (JP Morgan) estimates that the personal savings rate of citizens has basically disappeared, falling to a 12-year low, which is the time that led to the global financial crisis.
One sector that has experienced a particular decline is the real estate market. JP Morgan (JP Morgan) has an interesting proposition in this area, which is critical to determining economic health: given the sharp decline in the supply of homes for sale in the US, this means that housing prices may not experience another massive drop. In the Eurozone, the average level of household debt has always been low (at least compared to the US), so falling house prices are likely to bottom out soon.
It's a pretty innovative argument about market mechanisms, but it doesn't bode well for the financial health of citizens: if the average American or European isn't using their personal assets by buying a home, that means there simply isn't enough money to spend on goods and services.
Inflation has played a large role in shrinking personal wealth in the DM economy (for several years). Credit Suisse Bank estimates that the countries hardest hit by inflation are the US and the UK. Inflation is no longer “temporary,” but is deeply rooted in the Eurozone. By contrast, the DM economies Japan and Switzerland have a flatter trajectory.
Inflation is expected to continue until 2023. Deutsche Bank (Deutsche Bank) estimates that inflation is particularly ravaging the US and the Eurozone. On average, Germany has been hit harder than the rest of the Eurozone. The bank estimates that inflation in the US may ease slightly, while inflation in the Eurozone will still be relatively large. Germany is not expected to break through in the new year.
In Asia, Japan is expected to improve its handling of inflation, while China is expected to continue the same inflation trend as in 2022. There are signs that global manufacturing trends indicate a decrease in consumption in the DM economy. Credit Suisse Bank estimates that this has historically observed a relevant impact on earnings reported by most leading listed companies.
Now, around Q2, many institutions estimate that in the next 12 months, the US GDP growth rate will be 0%, and the situation in the Eurozone won't get much better. However, as the year came to an end, many agencies' GDP growth estimates (such as Morgan Stanley's) showed moderate GDP growth in the US in 2023, while the UK now predicts continued contraction in the Eurozone.
Given that the US intelligence situation is neither controlled nor significantly reduced, it can be said that even if there is a moderate increase, this means real terms.
In 2022, DM economies in the Western Hemisphere were the first to be affected by global inflation trends. Credit Suisse Bank estimated in October that this will continue until 2023, but inflation will rise in major emerging market economies such as India and Brazil.
Since then, however, both Brazil and India have shown a willingness to take active measures to combat inflationary trends, so this may be exaggerated. In fact, India and China are expected to become leaders in global economic growth in 2023, and other emerging market economies are likely to show positive trends.
For example, Morgan Stanley (Morgan Stanley) estimates that the prevailing view suggests that 2023 will be a brilliant year for India's economic growth, with China in second place.
Overall, Credit Suisse also estimates that most stock markets will not exceed 3% for the full year of 2023.
And the best growth tools would be high-quality corporate bonds and emerging market government bonds. The latter is a continuation of the theme that globalization is gradually coming to an end and “localization” will begin to dominate the world.
BlackRock estimates that price “damage” is far from enough to assume that US stock prices and valuations will continue to rebound. Within its framework, “damage” means a loss of confidence and volume of transactions needed to maintain historically high valuation trends and trajectories.
The persistence of low-intensity beliefs in technology stocks in the first three quarters, particularly when options were rolled out, provided plenty of material for false positive signs of the overall trend in 2022. However, the inflow/outflow trend is in line with expectations for the fourth quarter. Compared to institutional investors, retail investors are generally falling behind on the learning curve. Over the past year, they have been cashing out from US and European stock markets rather than betting on the downside. 2022 has been a brilliant year for short sellers, who are single-handedly cashing out, and retail investors' favorites like Tesla ( $Tesla(TSLA.US$ ), Apple ( $Apple(AAPL.US$ , Nvidia ( $NVIDIA(NVDA.US$ ) and AMD's failure.
Swallow
Investors who continue to participate in the market are likely to continue to watch the decline in “growth” technology stocks, which are likely to continue to fall due to reduced trading volume and continued institutional diversification.
At the same time, if dollar trading becomes less crowded, institutions will find an environment rich in goals in 2023: a rationalized dollar will not trigger a sell-off by foreign central banks — a large group of investors in US Treasury bonds — to stabilize their currency. If the dollar weakens, emerging market treasury bonds will also become very attractive. In addition, emerging market countries also have a large number of strong performing stocks and high-quality investment-grade corporate bonds in the pipeline.
However, if the US Federal Reserve decides to switch to its aggressive interest rate cut policy or investment managers do not continue to explore more complex diversification strategies, dollar trading will continue to be crowded, which in turn will complicate the economic recovery cycle and increase the financing costs of the US government's future bond issuance.
2023 will be a solid year for retail investors who will not simply buy and wait, but will tactically trade based on market dynamics. Exchange-traded products (ETPs) provide amplified risk exposure, and potential losses are limited to the amount invested and limited to that. In ETPs offered on the Tiger Securities platform, there are many ways to profit from major market trends:
$SP5Y provides 5 times the exposure of the S&P 500 in the larger market ( $SPDR S&P 500 ETF(SPY.US$ ) And $SPYS is on the downside.
$CHI3 provides 3 times the risk exposure of the MSCI China ETF, while $CHNS provides 3 times the negative risk exposure of the MSCI China ETF.
$KWE3's market exposure to the Chinese tech industry is 3 times, while $KWES's market exposure to the Chinese tech industry is 3 times less favorable.
For the German DAX40 index, the DAXS dollar provided -3 times the negative daily reverse leverage exposure, while the German DAX 40 and DAX 3 dollars provided 3 times the upward risk exposure.
For articles on broader events unrelated to tactical market trends, visit asianomics.substack.com. Recent articles include a 5-part series discussing the historical and cultural evolution of Hinduism and Buddhism in Asia, as well as a two-part series on the current state of the Korean and Indian military aircraft industry.
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