Having just begun, 2023 still leaves room for forecasts and reflections on what will happen: recession, inflation, central bank moves are under the lens of various analysts.
Uncertainty, pessimism, volatility: 2023 is not seen in an encouraging way for the global economy and finance.
Bloomberg News has compiled more than 500 thoughts from Wall Street strategists to paint the investment landscape ahead. And optimistic forecasts are hard to come by, with new pain for investors looming on the horizon after the big crash of 2022.
As the Federal Reserve steps up its most aggressive tightening campaign in decades, the consensus view is that a recession, however mild, will hit both sides of the Atlantic.
However, humility is the order of the day for forecasters, given that the 2022 cost-of-living crisis and double-digit market losses had not been estimated. This time around, the consensus may turn out to be wrong once again, delivering a number of positive surprises.
Goldman Sachs, JPMorgan Chase and UBS Asset Management, for their part, see the economy defy bearish forecasts as price growth eases, signaling big gains for investors if they find the right market.
The year, however, will be bumpy in trading. Deutsche Bank sees the S&P 500 index rise to 4,500 in the first half, before falling 25% in the third quarter on the back of a recession, before rebounding to 4,500 by the end of 2023 as the investors prepare for a recovery.
Below, the forecasts of important Wall Street financial groups: what is going to happen to the economy and finance in this 2023?
Amundi Asset Management
The asset management firm sees 2023 as two-speed, with plenty of risks to watch out for. Bonds are back, market valuations are more attractive and a Fed pivot earlier in the year should trigger attractive entry points.
Bank of America
2023 is marked by a shock: the recession. The US, euro area and UK are expected to see recessions next year, while the rest of the world is expected to continue to weaken, with China being a notable exception.
The shock of the recession likely means corporate earnings and economic growth will come under pressure in the first half of the year, while at the same time China’s reopening offers respite for some assets.
Barclays
This year’s aggressive rate hikes are expected to hit the world economy in 2023. Advanced economies are seen slipping into recession and we expect global growth of just 1.7%, with one of the weakest years for the world economy in 40 years.
We recommend bonds over equities, as well as a healthy allocation to cash.
AXA Investment Managers
A policy-induced recession looks like the price to pay for bringing inflation under control after a peak in late 2022. While we are confident that by mid-2023 the world economy will start to improve again, we caution against any excessive enthusiasm. Beyond the cyclical recovery, many structural issues will remain unanswered.
Credit Suisse
The eurozone and the UK have entered a recession, while China is in a growth recession. These economies are expected to bottom out by mid-2023 and begin a weak and tentative recovery, under a scenario that relies on the crucial assumption that the United States manages to avoid a recession.
Economic growth will generally remain low in 2023 against the backdrop of tight monetary conditions and the current ongoing shift in geopolitics.
Deutsche Bank
The recession we have been anticipating for nine months is approaching. A downturn and in the euro area in general may already be underway due to the energy shock resulting from the Russia-Ukraine war. Our expectation for a US recession by mid-2023 has strengthened on developments since early last spring.
JP Morgan
The good news is that central banks will likely be forced to change direction and signal interest rate cuts over the next year, which should result in a sustained recovery in asset prices and subsequently the economy by the end of 2023.
The bad news is that for that turnaround to occur, we will need to see a combination of increased economic weakness, rising unemployment, market volatility, falling levels of risky assets and falling inflation.
Unicredit
We expect a mild technical recession in both the US and Eurozone, followed by a below-trend recovery. Risks of growth are tilted to the downside, also due to negative geopolitical developments, more persistence in wage and price setting, and financial stability risks.
UBS Asset Management
While a recession is a very real possibility, investors may be surprised by the resilience of the global economy, even with such a sharp tightening in financial conditions. The labor market will certainly cool down, but healthy household budgets should continue to support spending in the services sector.
Furthermore, some of the major hurdles to the global economy emanating from Europe and China are set to improve, not worsen, between now and the end of the first quarter of 2023.
Generali Investiment
Early 2023 is dominated by a global economic slowdown, albeit desynchronized, but still high inflation (heat). Our central scenario calls for a mild recession in the euro area and an even milder one in the United States.
Risks are tilted to the downside: such a brutal tightening of monetary policy and financial conditions rarely leaves the economy and markets unscathed.
HSBC
We believe markets have become too complacent on both the Fed inflation and outlook as well as growth estimates. All of our cyclical leading indicators still point to much more weakness on the growth side over the next two to three quarters. The point here is that these signals are no longer confined to just one particular area of the economy. The weakness is much larger now, which gives us even more conviction in our caution. We remain decidedly risk averse for the first half of 2023.
Original article published on Money.it Italy 2023-01-03 12:26:22. Original title: Il 2023 sotto la lente: cosa può succedere all’economia globale
