Bloomberg News reports that for the global economy, stagflation is one of the main risks lurking in 2023. This is being anticipated by investors who say their hope for a market rally is still premature after the current year’s brutal sell-off.
What’s Lurking in 2023?
In the recent MLIV Pulse survey, at least 388 participants stated that a kind of scenario in which growth will continue to be slow, but inflation would remain elevated. Such a scenario is likely to remain pronounced in 2023. Following on close heels will be the trend of deflationary recession, and simultaneously the chances of economic recovery amidst high inflation is the slightest possibility.
However, after the central bank’s tightening, the results also hint at yet another year of challenges, especially for the risk assets. Other factors contributing to the challenges include the consequences of the ongoing Ukraine and Russian war and surging inflation. These aspects have adversely impacted the equity market and led to the financial crunch, which is being felt worldwide.
Amidst this ongoing tension and as the stocks are rallying in the fourth quarter, more than 60% of the survey participants revealed that as far as assets are concerned, the investors are still bullish in the market.
Nicole Kornitzer, associated with Buffalo International Fund, Kornitzer Capital Management Inc., said 2023 would be even more difficult. Undoubtedly stagflation is being looked for at present, said Nicole Kornitzer of the firm, which keeps a tab on around $6 billion.
Fears of Stagflation are Rampant
Find what is likely to occur on a global scale in 2023 in the table below.
Source: MLIV Pulse Survey (Running November 21st to November 25th)
Around 60% of the survey participants anticipate that a month from now, the dollar has a chance of further weakening. This is in sharp contrast to what happened last month when around 50% of the respondents revealed that they might go in for a Federal Reserve meeting with a dollar in an extended position.
The survey participants said that US inflation will likely drop below 3% in 2023, and then it’s likely to exceed 10%, hinting there will be some relief by the year’s end. This would come as good news for the officials of the Federal Reserve, who have already hinted that they were planning for downshifting to a 50 basis point surge in December so that the risks could be mitigated that have been posed due to the tightening.
Senior analyst Ipek Ozkardeskaya associated with Swissquote, states that the third and fourth quarters of 2023 are expected to be market rhetoric, so the shift could be too low for growth and recession.
