Member Brief: A Curation of Forecasts (2023)

There’s always the choice between locking back or peering forward. For 2023, we broke off the rearview and de-iced the windshield because this curation of forecasts by top banking institutions may help manage the numerous macroeconomic influences that lie ahead for retail, advertising, logistics, real estate, and eCommerce.

A problem becomes a crisis when our failure to address it threatens one’s identity; a polycrisis is when multiple problems interact with one another, potentially amplifying the sum of its parts in unpredictable ways. Popularized by Columbia University’s Adam Tooze, I suspect that it will become a word that may rise in popularity in 2023. It was former U.S. Treasury Secretary he recently commented:

This is the most complex, disparate and cross-cutting set of challenges that I can remember in the 40 years that I have been paying attention to such things.

While the study of a polycrisis requires a larger view of global economics and its many forces, we have drilled down on how each may impact the industries relevant to this group of industry leaders. These forces include: the Omicron variant, stagflation risk, nuclear escalation, Eurozone’s debt crisis risk, wage growth exceeding forecasts, U.S. inflation, European inflation, the Fed, the Biden administration, Russian gas boycott, conflict between Russia / Ukraine / United States, China, Italian government’s “intense pressure”, and German government’s “intense pressure.” We’ve learned over the previous few years that that each geography can play a role in the sum of its parts. We are too interdependent to suspect otherwise. The Ever Given blocked the Suez Canal and it affected you, one Chinese province’s COVID lockdown affected you. The Renasas Electronics factory fire led to 23 damaged machines; the impact was felt internationally.

The idea is to understand the potential of future supply shocks and other influences that could disrupt or encourage the industries most relevant to you. As we’ve seen, the “butterfly effect” is real.

According to UMASS-Amherst economist Isabella Weber, there are sectors that are most sensitive to shocks: “Among these, petroleum and coal products were the most sensitive to shocks. Oil and gas extraction, chemical products, farms, food and beverage and housing also featured highly.” As global emergencies overlap, supply shocks have become more common and inflation has lingered on. It’s never been more important to understand how sector-specific data (and the overlapping of other sectors) impacts the sum of all parts. And then, secondarily, impacts you.

In general, retailers may be forced to adapt to changing consumer behavior and economic conditions in order to weather overlapping crises. This may involve implementing new technologies or processes to facilitate online sales, reducing costs, or offering new products or services to meet the needs of consumers. It is important for retailers to stay informed about the evolving situation and to be proactive in addressing any challenges that may arise. As such, we’ve compiled 18 reports from banks and funds with a key excerpt from each document along and a link with access.

Goldman Sachs: Economic Research

Macro Outlook 2023: This Cycle is Different

As shown in Exhibit 3, we estimate a 35% probability that the US economy enters recession over the next 12 months, well below the median of 65% among the forecasters in the latest Wall Street Journal survey and toward the bottom of the range.

J.P. Morgan: Market Insights

A bad year for the economy, a better year for markets

For attractively valued emerging markets to shine in 2023, at least one of these three featured catalysts need to occur. We strongly believe that central banks will be less restrictive in 2023, but certain political outcomes, such as the end of China’s zero-Covid policy, or a cessation of hostilities in Ukraine, remain very uncertain.

Morgan Stanley: 2023 Investment Outlook

Applying the Lessons of a Turbulent Year to 2023

Global supply chain realignments, demographic change, debt deleveraging and a structural shift toward a consumption-led economy will be key trends for China in 2023. Manufacturing and trade are becoming less important in driving economic activity partly because of reduced offshoring by Western companies and rising wage costs in China.

Bank of America: Outlook 2023

Back to the (new) future

Michael Hartnett: I don’t think you can immediately say we’re going back to QE or zero rates, I mean that era’s not coming back, but what you can say is a lot of the assets that were penalized greatly in 2022, there’s been a lot of, if you like, creative destruction, more destruction than creation. But hopefully the valuations now a little bit more settled and these growth themes over the medium term can actually start to — you can start to sort of action on them.

Blackrock: 2023 Global Outlook

A new investment playbook

This is the most fraught geopolitical environment since WW II, in our view. The world is splitting up into competing blocs that pursue self-reliance.

HSBC: Global Private Banking

Looking for the silver lining

In recent years, wider security risks to physical assets and their supply lines have reappeared with many goods including food, water and energy. Governments and companies are trying to mitigate the effects by increasing inventories, diversifying sources and supply chains, investing in alternative energy and developing more local capabilities.

Barclays: Corporate and Investment Bank

Living with shock and awe: 2023 Global Outlook

2023 may well be one of the slowest years for global growth in decades. Our analysts expect the world to grow at 1.7% next year, a big slowdown from the 6%+ growth of 2021 and a significant drop from the 3.2% growth expected for 2022. Inflation will likely fall slowly, with consumer prices worldwide rising at a 4.6% average next year.

NatWest: The Year Ahead 2023

Essential insights into the big themes fuelling the outlook

We believe that monetary policy tightening cycles have a little further to run, although there have already been some hints that policymakers are becoming less aggressive. We forecast the Fed Funds rate will climb to a terminal rate of 5.0% in mid-2023, slightly below the 5.1% peak that the market is pricing in.

Citi: Wealth Outlook 2023

Roadmap to recovery: portfolios to anticipate opportunities

Despite recent performance, though, the digital revolution has not gone into reverse. Indeed, these technologies are becoming ever more deeply embedded in how we live and work. In the years ahead, we expect intensifying innovation driven by well-funded research and development. And we believe that businesses will have to either embrace new technologies and processes or face extinction. Put simply, the unstoppable trend of digitization remains in full force.

BNP Paribas: The Investment Outlook for 2023

Investing in an age of transformation

Though these worries have driven some large companies to cut their sourcing from or manufacturing operations in Asia and to shift them elsewhere, we see no largescale decoupling from either the region or from China.

Credit Suisse: Investment Outlook 2023

Supertrends – Diversify your risks

Our Millennials’ values Supertrend is set to benefit from long-term demographic patterns, as the young cohort in Asia in particular will dominate consumption and drive digital trends like social media, streaming, online shopping and fintech. Importantly, this generation has a long-term focus on the world of tomorrow, supporting biodiversity, the circular economy and health and nutrition

UBS: Asset Management

Investing through change: picture the opportunities

We acknowledge that the near-term macro outlook is unusually uncertain. But regardless of what 2023 brings, we believe the inflation, growth, and geopolitical factors that have caused market strife in 2022 are increasing the potential rewards for medium- and long-term investors willing to bear these risks. This is the good news about bad markets.

ING: global economic outlook 2023

May he live in interesting times

Our base case scenario remains that inflation in the developed economies will return to around 2% in 2024. However, this is no reason for relief and could be a very short-lived experience. In the longer term, structural shifts in the global economy are likely to push up costs and hence inflation. Deglobalisation – the restructuring of supply chains but also new trade barriers – presents new costs for corporates. Climate change and the transition to net zero will also initially push up costs for energy and commodities and will lead to more volatile inflation over the coming years.

Apollo: 2023 Economic Markets Outlook

A soft landing is possible

Here’s another situation that will surely need to unwind: A growing disconnect between earnings expectations for S&P 500 companies and overall GDP growth (Exhibit 26). It’s more likely that earnings expectations, which have been stubbornly high, will need to come down than it is for GDP growth forecasts to rise. While we are increasingly confident that the Fed might engineer a soft landing, we are still facing an economic slowdown.

Wells Fargo: Investment Institute

Recession, recovery, and rebound

We enter 2023 with an unfavorable rating on REITs overall; a favorable rating on Self-storage REITs, Retail REITs, and Data Centers REITs; and an unfavorable rating on Residential sub-industry REITs (Apartment, Single Family Home and Manufactured Homes), Office REITs, and Health Care REITs.

BNY Mellon: 2023 Outlook

Looking through to recovery

Inflation appears to have peaked, which will eventually enable central banks to slow the pace of rate hikes and ultimately shift into a holding pattern. However, risks have now shifted to the lagged impact of aggressive monetary policy tightening on economic growth and earnings.

Lazard Asset Management

Competition is fierce but quality companies that reinvest in themselves can stay on top.

In their view, the critical issues of the past 12 months—inflation, monetary policy, and the risk of recession—are likely to remain front and center, though in a different configuration over 2023. Inflation pressures, which dominated the markets in 2022, have, in our view, likely peaked across most developed economies.

And this is the report that influenced our focus on the polycrisis. It is well-written and insightful in ways that others are but Fidelity’s narrative was far less mechanical and more narrative-driven based on all available data.

Fidelity International: Navigating the polycrisis

Sustainability premia set to increase

Prices for air, sea, and land freight are falling and the backlogs created by Covid lockdowns are easing, which may help to soften the blow on consumption. The gradual removal of quarantine restrictions globally has boosted investor confidence, with China now the only major economy where significant requirements are still in place. Further relaxation there would remove a distinct hurdle for both China and the global economy.

Ideally, we will continue to add to this running list of investment prospectuses and macroeconomic outlooks. It’s never been more imperative for companies – new and old – to consider how their top and bottom lines are impacted by variables that are out of their control. The reaction and perspectives are in one’s control, education helps those useful reactions possible.

This member brief has been unlocked until January 1, 2023. To gain access to our archives + insights and curations like these, consider joining the Executive Membership

By Web Smith | Art by Alex Remy

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