Global growth slowed through 2022 on a confluence of unprecedented events, fiscal and monetary tightening, China’s Zero-COVID restrictions and the Russia-Ukraine war, which led to significant declines across asset classes.
The events from last year have a profound impact on the outlook for 2023, affecting not only economic growth and inflation, but also central bank policy, interest rates, credit quality, earnings, valuations, investor sentiment, and other critical performance indicators.
On Tuesday, the World Bank has issued a revised growth forecast for 2023, which bears dire implications for the global economy. The new projection of a mere 1.7% GDP growth is the lowest recorded outside of recessionary periods since 1993 and represents a substantial decline from the June 2022 forecast of 3.0% and the 6% growth of 2021.
Furthermore, the bank forecasts a modest 2.7% growth for 2024, and an average growth rate of under 2% for the entire 2020-2024 period – the most anaemic five-year span since 1960. The bank also cautions that major slowdowns in advanced economies such as the United States and the Eurozone may portend an impending global recession.
The World Bank’s recent assessment of global economic conditions highlights that while some inflationary pressures have begun to ease towards the end of 2022, partially helped by declining prices for energy and commodities, the potential for new supply disruptions remains high.
The bank noted that core inflation may persist at elevated levels and central banks may need to adjust policy rates more drastically than currently anticipated, potentially exacerbating the already pronounced global economic slowdown.
The U.S. Bureau of Labor Statistics reported on Thursday that annual inflation as measured by the Consumer Price Index declined to 6.5% in December from 7.1% in November, and in line with market forecasts. This is the lowest reading since December 2021, encouraging hopes that the Federal Reserve will shift to smaller 25 basis point increments and could soon stop raising interest rates. On a monthly basis, the CPI declined by 0.1% following November’s increase of 0.1%.
The annual Core CPI, which excludes volatile food and energy prices, rose by 5.7% on a yearly basis in December, compared to a 6% rise in November and in line with forecasts. The monthly Core CPI rose by 0.3%, compared to a 0.2% rise in the prior month, also in line with expectations.
Despite core inflation dynamics still looking strong the U.S. dollar index dropped, as investors priced in an earlier and lower end to the Fed’s monetary tightening cycle. Nonetheless, we should bear in mind that markets have tried several times to anticipate peak rates, but so far have failed each time.
The cooling inflation print for December; however, signals that we are getting closer to peak rates, even if we’re not quite there yet. Market expectations of a 25-basis point rate hike by the Federal Reserve in February spiked to 91% after the release of the CPI data, from 77% previously.
Despite remaining well above central bank targets at present, inflation should continue to moderate further as the economy slows, the labour market weakens, and supply chain pressures continue to ease. Now the focus will shift to fourth quarter reporting season as consensus view is that earnings will collapse, bringing the stock market down with them.
Friday kicks off the start of the fourth-quarter earnings season for S&P 500 companies with number of big U.S. banks reporting. The U.S. banks are forecast to report lower fourth-quarter profits, as lenders stockpile funds to prepare for an economic slowdown. Still market bulls are hoping the slowdown in inflation may pave the way for the Fed to be able to bring down consumer prices without severely supressing growth.
Violeta è entrata a far parte di Leverage Shares nel settembre 2022. È responsabile dello svolgimento di analisi tecniche e ricerche macroeconomiche ed azionarie, fornendo pregiate informazioni per aiutare a definire le strategie di investimento per i clienti.
Prima di cominciare con LS, Violeta ha lavorato presso diverse società di investimento di alto profilo in Australia, come Tollhurst e Morgans Financial, dove ha trascorso gli ultimi 12 anni della sua carriera.
Violeta è un tecnico di mercato certificato dall’Australian Technical Analysts Association e ha conseguito un diploma post-laurea in finanza applicata e investimenti presso Kaplan Professional (FINSIA), Australia, dove è stata docente per diversi anni.
Julian è entrato a far parte di Leverage Shares nel 2018 come parte della prima espansione della società in Europa orientale. È responsabile della progettazione di strategie di marketing e della promozione della notorietà del marchio.
Oktay è entrato a far parte di Leverage Shares alla fine del 2019. È responsabile della crescita aziendale, mantenendo relazioni chiave e sviluppando attività di vendita nei mercati di lingua inglese.
È entrato in LS da UniCredit, dove è stato responsabile delle relazioni aziendali per le multinazionali. La sua precedente esperienza è in finanza aziendale e amministrazione di fondi in società come IBM Bulgaria e DeGiro / FundShare.
Oktay ha conseguito una laurea in Finanza e contabilità ed un certificato post-laurea in Imprenditoria presso il Babson College. Ha ottenuto anche la certificazione CFA.