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In its “Global Financial Stability Report” released in October 2022, the International Monetary Fund (IMF) had originally estimated that economic conditions in the US and the Eurozone would be “reverting to the mean” somewhat faster than in the Emerging Markets (EM) countries. On the 30th of January, it released an update.
In the update, the IMF highlights that the market expects the policy rate hike cycle to have an accelerated cycle of easing in the latter half of 2023. However, it bears noting that this, by no means, can be construed as meaning that there will necessarily be an easing of recessionary conditions: as an article published in the end of 2022 indicated, most “pivots” on rate hike regimes have been followed by a strong bear market in the S&P 500 over the last fifty years.
The IMF also made a number of interesting estimations about global macroeconomics:
India will lead economic growth worldwide for at least two years, closely followed by China. Overall, its an era of growing prosperity for Low-Income Developing Countries as well as Emerging Market and Middle-Income Economies.
While virtually every advanced economy (i.e., the U.S., the Eurozone, Canada, the U.K. et al) will struggle to grow over the next year, only the U.K. is expected to contract in 2023 and bounce back with growth in line with other advanced economies in 2024.
Oil and commodities are expected to have a substantial shrinkage in prices over the course of 2023, which will carry over to some extent in 2024. If true, this will (of course) bring some relief to the average consumer.
The growth of India is an interesting paradigm. Unlike China, India is by no means a crucible for manufacturing goods destined to be consumed in the Western Hemisphere. Like India, large swathes of the economies in Low-Income, Middle-Income and Emerging Market countries do not subsist on exports to the Western Hemisphere either. China’s growth in the nineties was largely fueled by the shift in manufacturing from the West to the East.
In the era of “globalization,” the U.S. effectively became the “prime consumer” while China became the “prime producer.” As some contrarian economists had concluded circa Q4 2022, globalization is effectively under pressure while localization is growing. All in all, it’s very likely that we shall witness some very interesting evolutions and alignments in both geopolitics and macroeconomics over the course of this decade.
This update is rather interesting given that it’s from an institution that effectively has “skin in the game” in global geopolitics and macroeconomics which is a little different from that of, say, an investment bank or a financial services firm. The latter do have some interest in downplaying market risks to retain transaction volumes which, in turn, generates revenues. While it would be unfair (and impossible) to state that their forecasting is compromised, an “understating” of market-adverse events is a natural assumption for one to make. Of course, it bears remembering that neither set of forecasters have been right 100% of the time.
Lowering consumption patterns in the “prime consumer” – the U.S. – has been imputed for sometime now. Those with “skin in the game” in consumption are the likes of digital payments firms and credit providers. The results of a survey jointly conducted by payments and commerce platform PYMNTS as well as credit provider LendingClub Bank was released near the end of January, which uncovered some very problematic consumption patterns in the U.S. as of December 2022.
The survey has been conducted periodically over a number of months since mid-2021 and indicates a troubling pattern: an increasing number of people earning above $50,000 are reporting that they’re now living “paycheck to paycheck”, i.e. with no substantial savings put aside either as investments or in the form of spare cash after necessary expenses are accounted for.
The income brackets could broadly be interpreted thus: those making less than $50,000 could be considered “working class” while those making between $50,000 to $100,000 could be considered “middle class” or “lower-middle class” (depending on region in the U.S.). Similarly, those making above $100,000 can be considered “middle class” or “upper-middle class”. The survey indicates that the increase in the proportion of “working class” people reporting living paycheck to paycheck is nearly half of that reported by “lower-middle class” or “upper-middle class.”
Further depth to this picture is added by the survey’s findings that, overall, a fewer share of survey respondents report living “paycheck to paycheck” as compared to December 2020.
However, despite this fall, those most affected are the two “middle class” categories. One interpretation for this would be that the “working class” has likely been gearing down from being a dominant buyer of goods and services since 2021 with momentum in purchasing trends effectively being relegated to the two “middle classes.” As of 2022, even these two categories were under pressure.
Even further color is being imparted in overall purchasing decisions in 2022 versus 2023:
Nearly half of all respondents indicated that they didn’t purchase new vehicles or expensive items in 2022 and have no plans to do so in 2023. Interestingly, the tendency for those who did make some expensive purchases in 2022 and aren’t planning to do so in 2023 doesn’t seem to have a significant differential on the respondents’ personal circumstances, i.e., whether they were single or had a partner and whether they had children or not.
The survey highlights an interesting opinion among the respondents: they were predominantly hopeful that 2023 will be a better year. This opinion might or might not have added some contours to the findings which, on balance, comes across as rather grim. With the rate of wage increases showing a slowdown, as per latest government statistics:
and small businesses – which generally tend to be inflation/slowdown-averse – holding up the employment statistics by hiring more people than those fired by large corporations (as indicated in last week’s article), the prospect of additional capital being unlocked for spending is rather diminished for at least the course of this quarter (if not longer).
All in all, it will be a hard task to find a selection of U.S./EU-listed stocks that will generate substantial returns by virtue of a long-term holding pattern. On the other hand, 2023 is shaping up to be a target-rich environment for tactical investors making plays based on short-term patterns, which Exchange-Traded Products (ETPs) are perfectly poised to deliver at very economical and scalable costs. Learn more about Exchange Traded Products that provide magnified exposure on either the upside or the downside of major markets, sectors and investor-favourite stocks here.
Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.
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Certain documents made available on the website have been prepared and issued by persons other than Leverage Shares Management Company. This includes any Prospectus document. Leverage Shares Management Company is not responsible in any way for the content of any such document. Except in those cases, the information on the website has been given in good faith and every effort has been made to ensure its accuracy. Nevertheless, Leverage Shares Management Company shall not be responsible for loss occasioned as a result of reliance placed on any part of the website and it makes no guarantee as to the accuracy of any information or content on the website. The description of any ETP Security referred to in this website is a general one. The terms and conditions applicable to investors will be set out in the Prospectus, available on the website and should be read prior to making any investment.
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Notice
If you are not classified as an institutional investor, you will be categorised as a private/retail investor. At this time, we cannot send communications directly to private/retail investors. You are welcome to view the contents of this website.
If you are an ‘Institutional investor’, you affirm either that you are a Per Se Professional Client, or that you wish to be treated as an Eligible Counterparty Client, both as defined under the Markets in Financial Instruments Directive, or an equivalent in a jurisdiction outside the European Economic Area.
Risk Warnings
The value of an investment in ETPs may go down as well as up and past performance is not a reliable indicator of future performance. Trading in ETPs may not be suitable for all types of investor as they carry a high degree of risk. You may lose all of your initial investment. Only speculate with money you can afford to lose. Changes in exchange rates may also cause your investment to go up or down in value. Tax laws may be subject to change. Please ensure that you fully understand the risks involved. If in any doubt, please seek independent financial advice. Investors should refer to the section entitled “Risk Factors” in the relevant prospectus for further details of these and other risks associated with an investment in the securities offered by the Issuer.
This website is provided for your general information only and does not constitute investment advice or an offer to sell or the solicitation of an offer to buy any investment.
Nothing on this website is advice on the merits of any product or investment, nothing constitutes investment, legal, tax or any other advice nor is it to be relied on in making an investment decision. Prospective investors should obtain independent investment advice and inform themselves as to applicable legal requirements, exchange control regulations and taxes in their jurisdiction.
This website complies with the regulatory requirements of the United Kingdom. There may be laws in your country of nationality or residence or in the country from which you access this website which restrict the extent to which the website may be made available to you.
United States Visitors
The information provided on this site is not directed to any United States person or any person in the United States, any state thereof, or any of its territories or possessions.
Persons accessing this website in the European Economic Area
Access to this site is restricted to Non-U.S. Persons outside the United States within the meaning of Regulation S under the U.S. Securities Act of 1933, as amended (the “Securities Act”). Each person accessing this site, by so doing, acknowledges that: (1) it is not a U.S. person (within the meaning of Regulation S under the Securities Act) and is located outside the U.S. (within the meaning of Regulation S under the Securities Act); and (2) any securities described herein (A) have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction and (B) may not be offered, sold, pledged or otherwise transferred except to persons outside the U.S. in accordance with Regulation S under the Securities Act pursuant to the terms of such securities. None of the funds on this website are registered under the United States Investment Advisers Act of 1940, as amended (the “Advisers Act”).
Exclusion of Liability
Certain documents made available on the website have been prepared and issued by persons other than Leverage Shares Management Company. This includes any Prospectus document. Leverage Shares Management Company is not responsible in any way for the content of any such document. Except in those cases, the information on the website has been given in good faith and every effort has been made to ensure its accuracy. Nevertheless, Leverage Shares Management Company shall not be responsible for loss occasioned as a result of reliance placed on any part of the website and it makes no guarantee as to the accuracy of any information or content on the website. The description of any ETP Security referred to in this website is a general one. The terms and conditions applicable to investors will be set out in the Prospectus, available on the website and should be read prior to making any investment.
Leverage Investment
Leverage Shares exchange-traded products (ETPs) provide leveraged exposure and are only suitable for experienced investors with knowledge of the risks and potential benefits of leveraged investment strategies.
Cookies
Leverage Shares Management Company may collect data about your computer, including, where available, your IP address, operating system and browser type, for system administration and other similar purposes (click here for more information). These are statistical data about users’ browsing actions and patterns, and they do not identify any individual user of the website. This is achieved by the use of cookies. A cookie is a small file of letters and numbers that is put on your computer if you agree to accept it. By clicking ‘I agree’ below, you are consenting to the use of cookies as described here. These cookies allow you to be distinguished from other users of the website, which helps Leverage Shares Company provide you with a better experience when you browse the website and also allows the website to be improved from time to time. Please note that you can adjust your browser settings to delete or block cookies, but you may not be able to access parts of our website without them.
This website is maintained by Leverage Shares Management Company, which is a limited liability company and is incorporated in Ireland with registered offices at 2 Grand Canal Square, Grand Canal Harbour, Dublin 2.
By clicking you agree to the Terms and Conditions displayed.
