Three questions investors need to ask in 2023
IMF Managing Director Kristalina Georgieva recently said in a CBS Face the Nation interview that the IMF expects “one third of the world economy to be in recession”. She went on to outline the differing outlooks for the three major trading blocs in the world, the US, EU, and China, plus emerging market economies.
For most of the world economy, this is going to be a tough year, tougher than the year we leave behind. Why? Because the three big economies, U.S., E.U., China, are all slowing down simultaneously. The US is most resilient. The U.S. may avoid recession. We see the labor market remaining quite strong. This is, however, mixed blessing because if the labor market is very strong, the Fed may have to keep interest rates tighter for- for longer to bring inflation down. The E.U. very severely hit by the war in Ukraine. Half of the European Union will be in recession next year. China is going to slow down this year further. Next year will be a tough year for China. And that translates into negative trends globally. When we look at the emerging markets in developing economies, there, the picture is even direr. Why? Because on top of everything else, they get hit by high interest rates and by the appreciation of the dollar. For those economies that have high level of that, this is a devastation.
- Can Europe, which the IMF considers to be in recession, maintain its leadership role?
- How will China’s economy behave in light of it reopening initiatives? Global investors can’t get their Fed policy call right without getting the reopening trade call right/
- Will the US enter into recession? The stock and bond markets are in disagreement. Stocks are expecting a soft landing, while bond yields have peaked and discounting substantial economic weakness.
Source: http://humblestudentofthemarkets.blogspot.com/2023/01/three-questions-investors-need-to-ask.html
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