Perspectives edition 2022/10 (2022/11/23)
Clear & concise
- Germany and other advanced economies will be mired in a recession as 2023 begins;
- The epochal shift that is underway stands to impede the global economic recovery;
- Key rates will peak in the spring once inflation is descending from its peak readings;
- With central-bank liquidity draining away, capital-market volatility should remain high;
- Corporate bonds are looking more attractive and equities have catch-up potential, whereas real estate finds itself in the midst of a correction phase.
2023 - the first year after the epochal shift and the turnaround in interest rates, will begin with Germany and other advanced economies in the throes of recession. Where the easing on the inflation front which we foresee in the aftermath of this year’s dramatic rise in CPI should lead to a pause in the rate-tightening cycle, the epochal shift - largely independently of the course of the war in Ukraine - is only starting to unleash its knock-on effects.
Despite a number of rays of hope which suggest that inflationary pressure is going to swiftly abate, a clear downward trend in inflation rates is not yet likely to assert itself during the coming winter. For this reason, decision-makers at the Fed, the ECB and at most other G20 central banks can be expected to remain on the rate-hike path into the spring in a robust labour-market environment in spite of (in some cases, substantial) demand drop-offs. True, they are likely to raise rates at a gentler pace. Subsequently, monetary tightening will “only” take place through unwinding balance sheets that became massively bloated during the coronavirus pandemic. Thanks to falling inflation expectations and...