Banks Foresee Global Economic Downturn
Global banks are making dire predictions for 2023 that will impact retirement portfolios. Inflation, supply chain issues and Covid continue to plague the world economy. The best that be said is that at least it is not 2022.
Here are how the institutions that manage the world’s fortunes see the new year:
JP Morgan predicts a bad year for the economy. Even though inflation should ease, it will still be far above central bank targets. Supply chain pressures will improve but not disappear completely. They predict developed economies will fall into recession. There was an unexpected consequence of inflation. The only thing stopping a repeat of the 2008 housing crash is the limited supply homes. There are so few homes available because rising prices limited new housing starts.
Goldman Sachs also predicts recession. They see China’s on again, off again Covid response slowing global growth and dragging the global economy into recession. The world’s second largest economy weakened dramatically in 2022. Its rigid zero-Covid policy left China out of sync with the rest of the world. It disrupted supply chains and damaged the flow of trade and investment.
Blackrock made a more dire prediction. They said we are entering a new economic paradigm. “The Great Moderation, the four-decade period of largely stable activity and inflation, is behind us,” it said in its 2023 global outlook. “The new regime of greater macro and market volatility is playing out. A recession is foretold; central banks are on course to overtighten policy as they seek to tame inflation.”1 In other words, expect wilder market swings, persistent inflation, and slow growth. They recommend your portfolio reflect the idea that stocks have much further to fall. Blackrock says long bull markets are a thing of the past.
Fidelity International warned that the Ukraine war will continue to impact the economy. Banks will be more focused on taming inflation than supporting securities. Anne Richards is CEO of Fidelity International. She said, “As they tighten financial conditions in response, the risk of a hard landing is increased, and could play out as an economic contraction and labor market weakness.”2
HSBC said the global economic slowdown will be a drag on stock prices. They advise investors aim for diversification. They should focus on managing risk over profit taking.
Bank of America says 2023 could be a ‘difficult’ year for the US. “More often than not, when we’re tightening policy, pushing interest rates higher to slow down the domestic economy and bring down inflationary pressures, that often means we get a period of higher unemployment rates, and what would be characterized as a recession,” they explained. BofA thinks we’ve past peak inflation, but it will be with us for a long time to come. 3
The International Monetary Fund foresees one third of the world economy entering recession this year. The IMF Chief said, “Why? Because the three big economies, US, EU, China, are all slowing down simultaneously.” 4 It will feel like recession for hundreds of millions of people even if their countries avoid a downturn on a whole.
There is a consensus from all the leading banks. High inflation, recession, and increased market volatility will mark this coming year. Investors should prioritize safe haven assets over securities to preserve portfolio value. Contact us today to learn how a Gold IRA can protect your wealth from a ‘difficult’ year ahead.