CoreMacro
BCA’s flagship global macro and investment strategy platform, helping investors anticipate regime shifts, connect signals across regions and asset classes, and navigate the world’s most difficult macro questions.
It is not unusual for a period of rebounding share prices to occur between an inflation-driven selloff and a growth scare. Initially, stocks rally on falling inflation and prospects of lower interest rates. Then, worries about corporate profits intensify, and equity prices deflate along with falling Treasury yields. This is what happened in the US in 2000-2001 and is likely to occur in the coming months.
Our latest edition of the Big Bank Beige Book suggests that households, businesses and banks are in unusually good shape ahead of a recession.
European assets have enjoyed a stunning outperformance since October 2022. Can these strong returns last in 2023?
Hopes of a soft landing for the US economy will intensify over the coming months, allowing equities to rally. However, even if an equilibrium of high employment and low inflation is reached, it will be difficult to keep the economy there. Investors should remain tactically bullish on stocks but look to turn defensive in the second half of 2023.
In EM ex-China, growth will continue decelerating. Some economies will experience an outright recession, while most will have a growth recession. Nearly every single economy will experience a cyclical drop in inflation (with the exception of Turkey).
In response to lower energy prices and China’s reopening, European assets prices are outperforming. Will the ECB spoil the party?
While the housing downturn will be fairly mild in the US, it will be more severe abroad. Continue to favor bonds of countries whose housing fundamentals will limit rate hikes.
The crucial question for 2023 is: will the US and UK Beveridge Curves shift back inwards to their pre-pandemic versions, ushering in a soft landing? Or, will we slide down the new post-pandemic Beveridge Curves into recession? Plus: we reveal the most important chart for Europe and the most important chart for China in early 2023.
Why will Chinese consumer spending recover but not its industrial sectors? Will China's reopening boost the global business cycle and inflation? How fast will US core inflation fall and what are the implications for corporate profits? Are global equities pricing in enough bad news/profit contraction?
