Here are the black swans of 2023 – Dünya Newspaper

Source: dunya.com

After a tumultuous year for financial markets, Standard Chartered has outlined a number of potential surprises for 2023 that it considers to be underpriced by the market.

Eric Robertson, the Bank’s Director of Research and Chief Strategist, said major market movements will continue next year, even as risks decrease and sentiment improves. He warned investors to prepare for “another year of strained nerves and shaken brains”.

The biggest surprise, according to Robertson, will be a return to “more benign economic and financial market conditions” next year, with consensus pointing to a global recession and more turbulence across asset classes.

Here are eight potential surprises

That’s why he named eight potential market surprises that are “not zero” likely to occur in 2023, “significantly outside market consensus, or fall outside the bank’s own fundamental views, but are underpriced by markets.

Fall in oil prices

Oil prices rose in the first half of 2022 as a result of continued supply blockages and the Russian invasion of Ukraine. For the rest of the year, it was fluctuating. Oil prices fell 35% between June 14 and November 28 as OPEC+ production cuts and hopes of economic recovery in China prevented the decline from accelerating further.

It is suggested that a deeper-than-expected global recession, including delayed recovery in China due to the unexpected increase in Covid-19 cases, could lead to a “significant collapse in oil demand” in 2023, even in previously resilient economies, CNBC reported.

Oil will drop to $40

According to Robertson’s list of “potential surprises”, if the Russia-Ukraine conflict is resolved, this will remove the “war-related risk premium” (the additional rate of return investors can expect to take on more risk) from oil, and prices will rise to around 50% of their value in the first half of 2023. It will cause him to lose his

According to Robertson, with the rapidly falling oil prices, Russia cannot finance its military activities after the first quarter of 2023 and will accept a ceasefire. Although peace talks may take a long time, the end of the war will cause the risk premium that supports energy prices to disappear completely.

In this unlikely scenario, the collapse in oil prices would bring the international benchmark Brent crude from its current level of around $79 per barrel to just $40 a barrel, its lowest point since the peak of the pandemic.

Fed cuts rates 200 basis points

The main central bank story of 2022 is the Fed, of course. It came to the fore that the US Federal Reserve underestimated rising prices and compensated for President Jerome Powell’s mistake that inflation was not actually “temporary”.

Thereupon, the Fed increased the short-term borrowing rate from 0.25% to 0.5% at the beginning of the year to a range of 3.75% – 4% in November. Another increase is expected at the December meeting. The market is pricing the eventual peak to be around 5%.

According to Robertson’s list of “potential surprises”, if the US economy were to fall into a deep recession in the first half of the year, the central bank could have to cut interest rates by as much as 200 basis points.

Tech stocks fell sharply

Growth-focused tech stocks took a hit throughout 2022 as sharp rises in interest rates pushed up the cost of capital. But Standard Chartered says the industry could decline further in 2023.

Strategist Eric Robertson said on the list of potential surprises for 2023, the index could drop another 50% to 6,000.


Source: Dünya Gazetesi by www.dunya.com.

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