Hold My Beer

What’s going on?

Now that 2022’s rowdy reign is finally over, let’s find out if 2023 looks like your chance to blow off steam – or the hangover from hell.

What does this mean?

If one of your New Year’s resolutions is to adopt mindfulness and a positive attitude, you might want to start early. See, 2023 isn’t exactly promising to be the champagne-popping, caviar-downing, throw-your-budgets-out-the-window bonanza you’re hoping for: inflation should ease up, yes, but aftershocks from war-induced energy shortages and central banks’ relentless rate hikes are set to wreak more havoc.

In fact, economists predict the global economy will grow just (time for that deep-breathing practice) 2.4% next year, the lowest in three decades besides the disastrous 2009 and 2020. Still, we’ll take any growth when most pros are predicting full-blown recessions. Case in point: economists at both Citi and abrdn forecast the UK and Europe will likely enter the new year in a (deep breath in) recession, with the US following in the second half of 2023. Uh… you can breathe normally again now.

Why should I care?

For markets: Team U-S-A!

The US dollar’s been leading the pack this year, and – despite its recent stumble – it’ll probably stay strong next year. After all, investors tend to flock toward safer assets in uncertain times (read: recessions), and the dollar’s a tried-and-tested bet. So even though greenback-bolstering rate hikes are slowing down, traders still predict the dollar will hold its current value this time next year.

Zooming out: Unleash the beast.

Here’s the exciting bit: one major economy is expected to dodge the economy-busting bullet altogether. China’s forecast to grow over 5% next year, as the country relaxes its uncompromising zero-Covid stance and lets pent-up consumer demand go wild. That should wake up China’s slumbering companies, and the government’s business-supporting policy plans won’t hurt either. Add economy-boosting rate cuts to the mix, and you’ve got all the ingredients of a successful comeback.

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Originally Posted December 29, 2022 – Hold My Beer