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8 Top Economic Events to Watch in 2023

  • 7 mins read
top economic events, trends, 2023

2022 is behind us, and some might be glad it’s over. After over a decade of positive years for global stock markets, this year was quite poor in terms of performance. The NASDAQ 100 dropped nearly 29% of its value since the beginning of the year, and the MSCI world index lost slightly over 16% in 2022.

Indeed, not a good year for stock markets, but at the same time, not catastrophic as well. Looking back, we can say that 2022 was the beginning of a recession, but it was not yet a year of a major crisis in financial markets. And there’s a big difference between the two

Regardless, 2022 was important for one primary reason – the increase of interest rates and the rapid monetary tightening policy in most developed countries for the first time since the mid-2000s. Above all other things, that was the catalyst for the stock market collapse and the strength of the US dollar versus other currencies. And interest rates will also be in the spotlight in 2023, along with other major economic events. 

So, with that in mind, let’s see the main economic events and developments every trader needs to watch closely in 2023.

Top 8 World Economic Events to Watch in 2023

Here are eight economic events and trends to watch in the year ahead.

1. Central Banks Rate Hikes

Obviously, next year will be a very similar ballgame to 2022, with investors’ eyes focusing on central banks’ rate hike decisions. In 2022, the Federal Reserve tightened monetary policy relatively aggressively, raising the Fed funds rate to 4.25%-4.5%. Expectedly, most central banks worldwide followed the same policy, and policymakers have increased interest rates to levels of the pre-2008 crisis.

Looking ahead, most analysts and investment banks predict the Fed will continue raising interest rates to a range of 5%- 5.25% by mid-2023. But, then, the trend is likely to pause, and perhaps even a shift in the Fed’s policy framework by the end of 2023 will push back rates to a range of 4.25%-4.5%. In that aspect, one great tool to monitor the Fed’s rate hike expectations is the CME FedWatch Tool

Either way, in 2023, rising interest rates and a rapid monetary tightening policy will continue to heavily impact the world economy, consumer spending, global GDP growth, and ultimately, the stock and forex market.

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2. Housing Market Slowdown

The housing market experienced a significant slowdown in 2022, largely due to rising interest rates in most developed economies worldwide. This obviously had a direct impact on mortgage rates, resulting in a significant housing price slowdown for the first time since the 2008 crisis.

When we look ahead to the next year, most analysts forecast that the real estate prices cooldown is likely to continue in 2023 and 2024. Even if rates stay at current levels by the end of next year, new listings will likely decline, and the global real estate market might enter a correction mode.

3. Inflation – The Worst to Come or Already Over?

Same as in 2022, inflation will be the main feature of 2023. As a reminder, the inflation rate in the US spiked to 9.1% in June, the highest rate since 1981. Globally, the trend is the same, with most countries reporting high inflation rates following the Covid-19 pandemic and more than a decade of a near-zero interest rates policy. As a result, developed markets will go into recession as central banks raise interest rates to control inflation and wage growth. High inflation rates and the projected recessions in 2023 could also harm labor markets, which are expected to weaken next year, although modestly. 

However, there’s a place for optimism. Most headline consumer price index projections imply that global inflation rates will decline to 3%-4% in developed countries and to reasonable rates in emerging market economies. Still, inflation is expected to remain a major concern for central bankers and the global economy in 2023.

4. China’s Economic Crisis

One of the big stories of 2022 was China’s economic slowdown. Clearly, China’s economy is in serious trouble, and China’s economic turmoil might be a huge issue for global growth next year.

According to most polls, the Chinese economy is expected to grow by around 3% in 2022, far below the initial estimated 5.5%. But when we look ahead to 2023, most analyst predictions signal a recovery in 2023 to a total economic growth of 5% compared to 3% in 2022. Still, China is a unique market full of surprises, and one that every investor must follow next year.

5. World Economic Forum Meeting Davos 2023

Few people know how important the world economic forum meeting in Davos is. In the Annual Meeting 2023 in Davos, which takes place from 16-20 January, leaders from governments, large-scale corporations, and civil society will discuss priorities for the year ahead.

Generally, even though those who participate in the World Economic Forum have no power to make crucial decisions, they typically can impact political decisions and handle major issues such as the cost of living crisis and the labor market. Moreover, in most cases, the WCF can be a driving force of price movements in financial markets.

6. The War in Ukraine

As we look ahead to 2023, the Russia-Ukraine conflict is certainly a political event to follow. Frankly, it’s hard to know what is happening in Ukraine. It’s all very vague, and Putin somehow succeeded in his mission to make it sort of ‘another conflict’ somewhere in the world. Sad but true.

Nonetheless, the war in Ukraine has significant implications for many economies and global trade, particularly in Europe and Asia. As evident from 2022, energy prices are highly affected by any development in Ukraine, and the Russian Ruble has been one of the most volatile currencies over the past year.

So, all in all, the Russia-Ukraine conflict is likely to remain a trend in 2023 that may have a considerable impact on financial markets.

7. Energy Prices – Up or Down?

Energy prices have been very volatile in 2022, with significant price swings. Crude oil, for example, started the year at around $70 per barrel, then spiked to $120 before wiping out this year’s gains to trade again at about $75 per barrel. 

Currently, there’s a battle for control of the global oil market – the cartel versus the US and Europe. Looking into 2023, there are certainly more reasons to push energy prices higher than the other way around. The EIA expects WTI prices will average $86.36 per barrel, with some predictions of crude oil prices rising again to around $100 per barrel and even higher. On the other side of the coin, many analysts actually predict a decline in energy prices. For example, the World Bank recently reported it expects energy prices to decline by 11% next year, mostly due to China’s projected economic slowdown.

8. King Dollar

2022 was the year of the US dollar, which once again justified the title of the king dollar. Since the beginning of the year, the Dollar Index (DXY), which measures the performance of the US dollar against a basket of currencies, gained nearly 10%, with most of the gains coming directly from the US dollar strength versus leading currencies such as the Euro, Yen, and the British Pound. The strength of the King Dollar was even more significant a few months ago before the DXY dropped from 114.47 in September to its current price of 104.84. 

Regardless, in the new financial conditions, a strong dollar could be problematic for the US economy and emerging markets, which may lead to a scenario in which the US will be the first to get out of the reverse currency war. Still, with a favorable interest rate differential to other currencies (in particular, the Yen carry trade), the dollar is expected to remain strong in the upcoming year.

Final Thoughts

To sum up, 2023 is likely to be an even more challenging year than 2022. Even though the economic outlook for 2023 anticipates a recovery from the economic slowdown in 2022, most analysts still believe that the worst is ahead of us and that the stock market will crash even more in the upcoming year. However, we all know that predictions are not guarantees. In financial markets, the unexpected is expected.

Overall, with tighter financial conditions, markets will turn on the risk-off mode in the first half of 2023. As for the second half of the year, the economic outlook is pretty optimistic at the macro level; however, investors must consider the rapid monetary tightening policy adopted by most central banks in the previous year, which may start affecting the markets in late 2023.

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