Last year global stocks had their worst year since 2008. World stock market capitalisation fell nearly 20% which, in recent history, was only eclipsed by the near 50% drop in 2008. However, it should be remembered that the decline followed unprecedented levels of fiscal stimulus from governments and years of low-interest rates from central banks.
Stocks to fall further in 2023 H1?
According to a Bloomberg News survey of 134 fund managers, investors are expecting a 10% rebound in global equities for 2023. However, around half of those investors saw a deep recession as a concern and that high inflation could hurt stocks again. Remember that global inflation is above 8% right now.
The stagflationary view, high inflation, and slow growth is the consensus view. The path ahead from here for stocks will depend on the probability, depth, and length of any recession. You can see the two biggest fears that investors have here below:
What to watch for
This means that if recession and inflation fears grow then stocks should also face more pressure. However, if inflation shows signs of falling and growth metrics hold up then stocks could find some support. Going forward it is going to be these twin drivers of growth and inflation which should determine the path for stocks for 2023. At the moment slowing leading indicators from the US, recession fears, and higher global inflation levels are anticipated by the majority to keep stocks pressured for the first quarter of 2023.