Consumer

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.

China’s semiconductor demand and imports will continue to contract in 2023H1. Despite economic reopening, Chinese consumers will hold back spending on smartphones, personal computers (PC) and other consumer electronics over the next six months. Meanwhile, overseas customers will continue to reduce their orders for electronic goods made in China following the excessive consumption experienced during the pandemic. There is more downside for both Chinese and global semiconductor share prices. We recommend a relative trade: long Chinese semiconductor stocks / short global semi stocks.

This digest version of our Special Report contains its conclusion along with a high-level review of how we reached it. It is structured identically to the full document, but with less than half the word count, so a reader can swiftly absorb the punch line while easily moving between the versions to zoom in on the details most relevant to his/her process.

Today we are publishing a charts-only report focused on the key macroeconomic data as well as each GICS1 S&P 500 sector. Many of the charts are self-explanatory; to some we have added a short commentary. The charts cover macro, valuations, fundamentals, technicals, and the uses of cash. Our goal is to equip you with all the data you need to make investment decisions in these sectors.

Workers have a cyclical wind at their backs as labor demand exceeds supply, but a wage-price spiral is no more than a remote possibility. The structural backdrop has turned significantly against them since the last bout of high inflation 40-plus years ago and they are no longer price makers.

Relative to beaten-down expectations, global growth will surprise on the upside in 2023. Investors should overweight equities for now but look to turn more defensive in the second half of the year.

In Section I, we note that the global growth outlook has modestly deteriorated over the past month, despite an improving 12-month outlook for Chinese domestic demand in response to the imminent end of the nation’s “dynamic zero-COVID” policy. Investors should remain conservatively positioned over the coming year, as we recommended in our Annual Outlook report. In Section II, we examine whether the structural risks facing global stocks are higher or lower today than they were prior to the global financial crisis, and what that implies for stock and bond risk premia.

In this <i>Strategy Outlook</i>, we present the major investment themes and views we see playing out next year and beyond.

Crypto broker FTX’s bankruptcy does not pose a systemic threat to markets. It did reveal something deeply unflattering about excess liquidity, however, and suggests that other private investments may come a cropper.

Today, we are sending you the BCA annual outlook for 2023. The report is an edited transcript of our recent conversation with Mr. X and his daughter, Ms. X, who are long-time BCA clients with whom we discuss the economic and financial market outlook for the next twelve months toward the end of each year.