Macroscope | China recovery and policy easing could make 2023 a year to remember for investors
- With so much bad news already factored in during 2022, there is the chance markets could be surprised on the upside by unexpectedly better news in 2023
- The stock market’s reputation as the top predictor of the economic cycle means investors should anticipate better news rather than looking over their shoulders
On the positive side, there is still plenty of liquidity to nurture global economic confidence and boost financial markets. With a bit of luck, 2023 should be the year of cautious recovery.
The problem is that there is so much uncertainty. When the chips are down, investors naturally prefer to duck for cover into safe haven bolt-holes like cash, ultra-safe government debt such as German bunds and the US dollar.
With the war in Ukraine, the global inflation spike, higher interest rates and the threat of recession, it is no surprise world equity markets are feeling the strain. The US S&P 500 share index is down about 20 per cent in 2022 and risk aversion is on the rise again.
Even government debt markets have turned the tide on the recent bear market for fixed income. US Treasury yields have fallen in the last two months on safe haven fears as investors have begun to fret about the risk of impending recession.
