Global Economic Outlook for 2023? A stormy start followed by a glimmer of hope Stock market

meInvestors should prepare for another turbulent year in financial markets, economists warn as central banks battle inflation, China reopens its economy after Covid-19 restrictions and Ukraine war pushes the world economy towards recession.

The first half of the new year is likely to be volatile, according to Wall Street forecasts, next Global markets suffered their biggest decline since the 2008 financial crisis last year.

But the US S&P 500 is still expected to end 2023 slightly higher than it did at the beginning of the year. The average target of 22 strategists surveyed by Bloomberg for the S&P 500 ends 2023 at 4,078 points — about 6% higher than in 2022.

Economists expect the US Federal Reserve to slow its interest rate increases this year, as the outlook for the US economy worsens. US inflation has eased back from its peak last summer, while a string of Fed rate hikes in 2022 has also cooled the housing market.

“We believe a period of subtrend growth is inevitable, and recession risks are high as the late effects of more tightening monetary policy work their way through the economy,” said Brian Rose, chief US economist at UBS Global Wealth Management.

Michael Antonelli, managing director and market strategist at investment bank Baird, predicted that the Fed will end the hiking cycle in February, and “hit the pause button” after another rate hike. He also expects the US stock market to achieve gains during 2023, noting that two consecutive declines are “very rare.”

“Stock markets are about ‘Are things getting better or are things getting worse?'” “I think it’s going to get a little better next year,” Antonelli told Yahoo Finance Live.

“I don’t think we’re making any big gains, but I think next year is going to be fairly positive,” Antonelli added.

Deutsche Bank expects an economic slowdown this year, which will hit financial markets.

“We see major stock markets fall 25% from somewhat higher levels today when the US recession hits, but then fully recover by year-end 2023, assuming that The recession only lasts for several quarters.” general.

Strategists at Russell Investments believe a recession looks likely in 2023 and stock markets may struggle but remain hopeful that a global economic recovery is on the horizon by the end of the year.

The head of the International Monetary Fund had warned of this This year will be “tougher than the year we leave behind”, with a third of the world’s economy in recession. This is because, Kristalina Georgieva said, “the three big economies – the United States, the European Union and China – are all slowing down simultaneously.”

A global downturn may prompt central banks to reverse some of the massive interest rate hikes that were implemented in the past year. Nikolaj Schmidt, chief international economist at investment management firm T. Rowe Price, expects central banks to ease monetary policy as early as the second half of 2023.

“We see the world slipping into a global recession in 2023. The recession will be the result of massive monetary tightening by central banks over the past 12 months. As a silver lining, it will sow the seeds of a significant inflation correction,” Schmidt said.

Analysts at investment bank Jefferies expect a global recession this year, but expect Asia to avoid an outright downturn. The region could benefit from a tourism rebound, as Chinese tourists slowly begin to return to travel.

“Global economic conditions continue to deteriorate as inflation continues to rise and market conditions tighten. However, Asia can best out of a bad situation and avoid an outright recession. Past the shocks from the dotcom crash, the GFC [Great Financial Crisis]Analysts at Jefferies said Asia has recovered quickly, and we expect it to do the same in 2023.

China’s decision to ease Covid-19 restrictions last month may ease global supply chain tensions, but it could also increase demand for commodities and energy, adding to inflation pressures.

The Bank of England is expected to raise interest rates in the UK again in the coming months, with the bank rate as high as 4.5% in the summer, from current 3.5%.

Britain’s FTSE 100 was one of the few major stock indices that rose during 2022, gain about 1%. Ipek Ozkardeskaya, chief analyst at Swissquote Bank, predicted that the FTSE 100’s outperformance could extend into the new year.

If Chinese reopening leads to another spike in inflation due to higher energy and commodity prices, then… FTSE She said the 100 could continue to offer a good shelter for those looking to hedge against energy-led global inflation to mitigate negative impacts.

“Of course, the largest British companies do not reflect the underlying British economy, so a good performance of the FTSE 100 index will not change the fact that small, locally focused companies will likely continue to suffer from high inflation, stagnation and possibly another year of political turmoil as the cherry on top,” she warned of political turmoil.

Kevin Bucher, CIO of Ravenscroft Investment Services Group, hopes the economic environment will become more favorable as the year progresses, leading to a recovery in the markets.

“Although the outlook remains problematic, asset prices should rebound as lower inflation allows central banks to halt their monetary tightening with lower interest rates expected in the second half of the year,” Bucher said.

Paul Glover, chief investment officer at NFU Mutual, suggested that 2023 could “pleasantly surprise investors,” citing encouraging signs that inflation may have peaked.

He added that the UK market could benefit from its significant exposure to international revenues, and the potential for takeover bids for UK companies.

The Russian economy has already entered a recessionAnd its economic crisis is likely to continue in 2023.

“Having started a brutal war, Putin has no easy way out,” said economists at Berenberg Bank. Ukraine and the free world stand up to him. The expenses of the war, the slow poison of sanctions, the flight of parts of the urban elite, and the growing costs of repression will be an ever-worsening burden for Russia as long as Putin remains in power.”

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