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All of those economic and market forecasts for 2023 are dripping in

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The thing about macroeconomic forecasting is that so complicated. It’s not just drawing lines on a chart, as shown in the chart below from Morgan Stanley:

© Morgan Stanley

However, even considering these many complexities, 2022 was a difficult year to predict. Its external state can be demonstrated by this 322-year data snapshot from Bank of America:

© Bank of America

Fortunately, the themes for 2023 seem to be more predictable. In fact, judging by a slew of year-end economics and pre-land market strategies in recent weeks, they are identical to the current investment consensus.

Everyone seems to agree that global GDP growth will continue to slow, and that inflation will peak but remain flat. Central banks will continue to tighten, though not so fast. A recession caused by the Fed will calm excessive consumer spending in the US, but the balance sheets of households, businesses and banks will all remain in good shape overall. In short, 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 World Order Changing – It can be recycled again.

Opening a preview of a year ago, it feels good to be pessimistic, like a reminder that a recession is coming just about everywhere. lower Dad’s army Title graphic via Citigroup uses Format Technically correct Measure two quarters or more:

© City

So for an investor, the key will be to understand the regional interaction between slowing growth and slowing inflation. The Enlightenment can be found somewhere, somehow, within the zodiac combination of Goldman Sachs’ GDPR/CPI:

© Goldman Sachs

Of course, past performance in forecasting inflation often indicates future returns. BlackRock provides the Palm Graph:

© BlackRock

But there is no arguing with price markets. Money says interest rates will rise quickly, except where they rise slowly or fall, says Credit Suisse:

© Credit Suisse

Right now, the cynical reader might point out that in the long run, money markets are almost as bad at predicting rates as economists are at predicting inflation. . .

© SG Securities

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

Predicting exactly when central banks will stop is beyond any economist’s purview, it seems, but at least some are willing to take a stab at it. This is how Societe Generale:

© SG Securities

Another way to approach the issue of timing is to cite antecedents. Below, it appears, is JPMorgan planning the Fed’s pivot on inflation expectations:

© JPMorgan

The biggest known unknown of 2023 is China. In general, economists are not trained in either virology or political science. But like BofA below, they’re willing to offer both bash:

© Bank of America

Emerging markets are largely dependent on Chinese policy making, so logic says they are impossible to connect with. Fortunately, logic is not a prerequisite when creating customer-focused content. Thus, the consensus advice is to buy in anticipation of a China recovery in combination with looser US monetary conditions, but don’t buy any time soon because recessions in emerging markets will be deep and prolonged.

Citi illustrates the quandary of near-term caution around emerging markets with. . . Football cliché attached to an unshaven businessman with a ladder?

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© City

And reopening China is only positive if supply chains start working again. But supply chains are complex and dangerous, as explained here by Liberum:

© Liberum

On the flip side, there is always money in the greenwashing. Here’s SocGen to show you where some of that money might be going:

© SG Securities

In terms of valuation, some markets look cheap and some aren’t.

Well – the banks would say every year that now is the time to be selective, to prefer quality over non-quality things, etc. But this time they really mean it! Just look at this interesting scatter chart from Goldman:

© Goldman Sachs

And look at this more interesting scatter chart from Morgan Stanley, which brings predictions forward with correlations added And the relative volatility:

© Morgan Stanley

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

© JPMorgan

. . . So in conclusion, we probably need to do more than pick out the weirdest infographics to write a proper synopsis for next year’s previews. Until time permits, however, your options for navigating appear to be forthcoming 12 The 13 months either can be summed up by the BofA paint sample chart. . .

© Bank of America

. . . Or, from Credit Suisse, by fast-paced train away from the QR code labeled “find out more”:

© Credit Suisse

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Economic

We need to pay more attention to skewed economic signals

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The writer is chair of Queen’s College, Cambridge and advisor to Allianz and Gramercy

Inflation was the dominant economic and financial issue of 2022 for most countries around the world, especially for advanced economies that have a consequential impact on the global economy and markets.

The effects have been seen in declining living standards, increasing inequality, increasing borrowing costs, stock and bond market losses, and occasional financial mishaps (fortunately small and so far contained).

In this new year, recession, both actual and feared, has joined inflation in the driving seat of the global economy and is likely to replace it. It’s a development that makes the global economy and investment portfolios subject to a wide range of possible outcomes — something that a growing number of bond investors seem to be aware of more than their equity counterparts.

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International Monetary Fund iYou will likely review soon Her economic growth forecasts again, predicting that “a third of the world will be hit by recession this year”. What is particularly notable to me about these worsening global prospects is not only that the world’s three major economic regions – China, the European Union and the United States – are slowing down together, but also that this is happening for different reasons.

In China, a chaotic exit from the wrong Covid-19 policy is undermining demand and causing more supply disruptions. Such headwinds to domestic and global economic well-being will continue as long as China fails to improve the coverage and effectiveness of its vaccination efforts. The strength and sustainability of the subsequent recovery will also require that the country more vigorously renew a growth model that can no longer rely on greater globalization.

The European Union continues to deal with energy supply disruptions as the Russian invasion of Ukraine continues. Strengthening inventory management and reorientation of energy supplies is well advanced in many countries. However, it is not yet sufficient to lift immediate constraints on growth, let alone resolve long-term structural headwinds.

The United States has the least problematic view. The headwinds to growth are due to the Fed’s struggle to contain inflation after mischaracterizing rate increases as fleeting and then initially being too timid to adjust monetary policy.

The Fed’s shift to an aggressive front-load of interest rate hikes came too late to prevent the spread of inflation in the services sector and wages. As such, inflation is likely to remain stubborn at around 4 percent, be less sensitive to interest rate policies and expose the economy to greater risk for accidents from additional policy errors that undermine growth.

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The uncertainties facing each of these three economic areas suggest that analysts should be more careful in reassuring us that recessionary pressures will be “short and shallow”. They need to be open, if only to avoid repeating the mistake of prematurely dismissing inflation as transient.

This is especially important because these diverse drivers of recessionary risk make financial fragility more threatening and policy shifts more difficult, including potentially Japan. Get out of interest rate control Policy. The range of possible outcomes is extraordinarily large.

On the one hand, a better policy response, including improving the supply response and protecting the most vulnerable populations, can counteract the global economic slowdown and, in the case of the United States, avert a recession.

On the other hand, additional policy errors and market turmoil can lead to self-reinforcing vicious cycles with rising inflation and rising interest rates, weakening credit and compressed earnings, and stressing market performance.

Judging by market prices, more bond investors are better understanding this, including by refusing to follow the Fed’s interest rate guidance this year. Instead of a sustainable path to higher rates for 2023, they believe recessionary pressures will lead to cuts later this year. If true, government bonds would provide the yield and potential for badly missed portfolio risk mitigation in 2022.

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However, parts of the stock market is still weakly bearish pricing. Reconciling these different scenarios is more important than investors. Without better alignment within markets and with policy signals, the positive economic and financial outcomes we all desire will be no less likely. They will also be challenged by the risk of more unpleasant outcomes at a time of less economic and human resilience.

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Economic

Macro hedge funds end 2022 higher, investors say, while many others take big losses By Reuters

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© Reuters. FILE PHOTO: Traders work on the trading floor of the New York Stock Exchange (NYSE) in New York City, US, January 5, 2023. REUTERS/Andrew Kelly

By Svea Herbst Baylis

NEW YORK (Reuters) – Some hedge funds betting on macroeconomic trends have boasted of double and even triple-digit gains for 2022, while other high-profile companies that have long been on technology stocks have suffered heavy losses in volatile markets, investors said.

Rokos Capital, run by Chris Rokos and one of a handful of so-called global macro companies, gained 51% last year. Fund investors this week, who asked not to be identified, said Brevan Howard Asset Management, the company where Rokos once worked, posted a gain of 20.14% and Caxton Associates returned 16.73%.

Haider Capital Management’s Haider Jupiter Fund rose 193%, an investor said.

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Data from hedge fund research showed that many macro managers have avoided crumbling stock markets that have been rocked by rapid interest rate increases and geopolitical turmoil, including the war in Ukraine, to rank among the best performers in the hedge fund industry. The company’s macro index rose 14.2% while the general index of hedge funds fell 4.25%, its first loss since 2018.

Equity hedge funds, where the bulk of the industry’s roughly $3.7 trillion in assets are invested, fared worse with a loss of 10.4%, according to HFR data. And while that beat the broader stock market’s loss of 19.4%, some high-profile funds posted even bigger losses.

Tiger Global Management lost 56% while Whale Rock Capital Management ended the year with a 43% loss and Maverick Capital lost 23%. Coatue Management ended 2022 with a loss of 19%.

But not all companies that bet on technology stocks suffered. John Thaler JAT Capital finished the year with a 3.7% gain after fees after a 33% increase in 2021 and a 46% gain in 2020.

Sculptor Capital Management (NYSE::), where founder Dan Och is fighting the company’s current CEO in court over his salary increase, posted a 13% drop.

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David Einhorn’s Greenlight Capital, which bet that Elon Musk would be forced to buy Twitter, ended the year up 37% while Rick Sandler’s Eminence Capital rose 7%.

A number of so-called multi-manager companies where teams of portfolio managers bet on a variety of sectors also boast positive returns and have been able to deliver on their promise that hedge funds can deliver better returns in distressed markets.

Balyasny’s Atlas Fund (NYSE: Enhanced) gained 9.7%, while Point72 Asset Management gained 10%. Millennium Management gained 12% while Carlson Capital ended the year with a 7% gain.

Representatives for the companies either did not respond to requests for comment or declined to comment.

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German automakers point to easing supply chain problems

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Sales at BMW and Mercedes-Benz jumped in the final months of 2022 as the German premium auto brands indicated supply chain problems plaguing the industry were abating.

Automakers around the world have experienced parts shortages since the pandemic, especially semiconductors, leaving many of them with large fleets of incomplete vehicles that can’t be delivered to customers.

BMW and Mercedes each said their full-year vehicle deliveries fell last year by 4.8 percent and 1 percent, respectively, due to Suppliers Bottlenecks as well as lockdowns in China and the war in Ukraine.

But supply pressures eased in the last quarter of the year, as BMW recorded a 10.6 percent jump in sales, with 651,798 vehicles delivered, and Mercedes fulfilling 540,800 orders, up 17 percent from the same period in 2022.

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BMW He said the main effects of supply chain bottlenecks and continued lockdowns were felt in the first six months of the year, adding that “sales were steadily picking up in the second half.”

Mercedes boss Ula Kallenius told the Financial Times last week that the list of problems in the auto supply chain was declining, but added that long waits for cars would continue into 2023.

“One chip is enough to be vital [ . . .] Missing, and then you can’t finish the car, even if you have everything else.

Both brands recorded strong sales growth electric car. Mercedes, which last week announced a plan to build 10,000 charging docks, said EV shipments grew 124 percent to 117,800 last year compared with its predecessor.

Similarly, BMW reported strong growth in electric vehicle sales, with deliveries of fully electric vehicles doubling last year to 215,755.

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Analysts at Bank of America said that sales of electric vehicles, including hybrid cars, reached a historic peak last November, with 1.1 million units sold. They attributed this largely to the upcoming phase-out of customer subsidies in Germany.

Participate in Mercedes BMW and BMW prices held steady Tuesday morning as investors priced in an image of an improving showing.

Rolls-Royce, a subsidiary of BMW, announced Monday that sales have hit a 119-year record, driven by strong demand in the United States, its largest market.

The luxury brand has been largely unaffected by the semiconductor pressure, mainly because it makes relatively few compounds and therefore needs fewer chips.

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