All of these economic and market outlooks for 2023, distilled

The problem with macroeconomic forecasts is that they are extremely complicated, as the chart below from Morgan Stanley illustrates:

Yet even taking into account these many complexities, 2022 has been a difficult year to predict. Its outlier status can be demonstrated by this 322-year-old data snapshot from Bank of America:

Fortunately, the themes of 2023 seem much more predictable. In fact, judging by the multitude of year-end market and economic strategy previews that have landed in recent weeks, they are identical to the current investment consensus.

Everyone seems to agree that global GDP growth will continue to slow and inflation will plateau but remain sticky. Central banks will continue to tighten, although not as quickly. A Fed-induced recession will tame the US consumer spending frenzy, but household, corporate and bank balance sheets will remain generally healthy. In sum, that means all the usual titles – The Great Rotation; Welcome to the new normal; At the crossroads ; The sum of All Fears; Darkest before dawn; The changing world order – can be recycled once again.

When opening an overview of the coming year, it is good to be pessimistic, for example with a reminder that recession is coming almost everywhere. The table below via Citigroup uses the technically correct measure of two or more quarters:

So for an investor, the key will be to understand the regional interaction between slowing growth and slowing inflation. Enlightenment can be found somewhere, somehow, in this GDP/CPI zodiac constellation from Goldman Sachs:

Of course, the past performance of inflation forecasts is often indicative of future returns. BlackRock provides the slingshot chart:

But there is no discussion with the rate markets. Money says interest rates will rise quickly except where they rise slowly or fall, according to Credit Suisse:

By now, a cynical reader might point out that money markets are almost as bad at predicting rates over the long term as economists are at predicting inflation. . .

However! With global inflation peaking (probably), 2023 will (probably) be the pivot year.

Predicting exactly when central banks will stop is beyond the reach of any economist, it seems, but at least some are willing to take a chance. This is the SocGen method:

Another way to approach the issue of timing is to cite a precedent. Below, apparently, is JPMorgan’s plot of a Fed pivot around inflation expectations:

The biggest known unknown of 2023 is China. Economists are generally not trained in virology or political science. But like BofA below, they’re ready to give both a shot:

Emerging markets are largely dependent on Chinese policy-making, so logic dictates that they are impossible to call. Fortunately, logic is not a prerequisite when generating customer-focused content. The consensus advice is therefore to buy in anticipation of China’s rebound in combination with looser US monetary conditions, but don’t buy anytime soon as emerging market recessions will be deep and long.

Citi illustrates the dilemma of short-term caution around emerging markets with . . . a football snap attached to an unshaven businessman with a ladder?

Also, reopening China is only positive if supply chains start working again. But supply chains are complex and fulminant, as Liberum illustrates here:

On the other hand, there is always money in greenwashing. Here’s SocGen to illustrate where some of that money might land:

From a valuation perspective, some markets look cheap and some don’t.

OK — banks could say every year that now is the time to be selective, to prioritize quality over things that aren’t quality, and so on. But this time, they really mean it! Just look at this exciting scatterplot from Goldman:

And check out this even more exciting scatterplot from Morgan Stanley, which projects forecasts while adding correlations and relative volatility:

So in conclusion. . . wait what? Is there still a technical analyst on JPMorgan’s payroll? Good. Let’s take it:

. . . So, in conclusion, we’ll probably have to do more than pick out the weirdest charts to craft a proper summary of the year ahead’s previews. Until time permits, however, it looks like your options for navigating the future 12 13 months can be summarized either by a paint sample chart from BofA. . .

. . . or, from Credit Suisse, by high-speed train away from a QR code labeled “find out more”: