A-shares May Stand Out This Year amid Global Recession

Below is a brief prediction of the global market in 2023 given by China Securities Cooperation.

Prediction 1: A hard landing and deep recession of the US economy may be inevitable in 2023

Historically, the conditions for a soft landing of the US economy after a cycle of interest rate hikes include strong fiscal stimulus (1966) or preventive rate cuts (1995, 2019). Considering that inflation is at a high level and the Federal Reserve's interest rate hike is too late, it is difficult to meet the conditions for a soft landing of the US economy in the short term. A hard landing and deep recession of the US economy in 2023 may be inevitable.

Prediction 2: In 2023, China's domestic demand will bring back the resilience seen in the United States in the 1990s

The Bank of Japan raised interest rates rapidly in the 1990s, and the Japanese economy bottomed about two years later than the US economy. The inspiration for the present is that China's independent easing policy in 2022 is expected to allow China's domestic demand-grounded economy to bring back the resilience seen in the United States in the 1990s.

Prediction 3: China's monetary policy will remain neutral and loose

In 2023, China's economy is in the recovery period, the inflation risks are limited, and monetary policy is not constrained by inflation. Considering the high pressure from overseas demand, the monetary policy may have a higher tolerance for the recovery of domestic demand. Therefore, it is expected that the domestic monetary policy will remain neutral and loose in 2023.

Prediction 4: A-shares may stand out amid global recession

Judging from the key factors of the independent market in the United States in the 1990s, there are three things that resonance the present. At the same time, although the pressure from overseas demand is significant, the real estate policy and debt settlement are similar to those at the end of 2014. After the domestic demand-grounded economy stabilises, it is expected that the A-shares will move up significantly.

Prediction 5: The Federal Reserve will pause interest rate hikes, but it will only bring about a bear market rebound and cannot reverse the downward trend of US stocks

The current US stock bubble and the Fed’s rate hike are very similar to that happened in Japan in the 1990s. Although it is believed that the Fed may suspend raising interest rates in the future, it will only bring about a bear market rebound and cannot reverse the downward trend of US stocks.

Prediction 6: In 2023, gold will be the most recommended product among major assets, with a target of US$2,000 in the first half of the year, and may continue to rise in the second half of the year

The core factor that weighed on gold in 2022 is that the pace of global central bank’s tightening continued to exceed expectations. In 2023, the global central banks headed by the Federal Reserve may stop raising interest rates, and the global recession will make gold more attractive. It is expected that gold will usher in a reversal in 2023, and the target in the first half of 2023 remains at $2,000.

Prediction 7: The down cycle of the CRB commodity index is only halfway through, and there may be a rapid decline in the first half of 2023

On the fundamentals, no matter how tight the supply is, it is difficult to support such a high commodity price in the face of rapidly falling demand. The current contradiction between supply and demand has eased. It is expected that commodities will continue to decline rapidly in the first half of 2023, which is far from a conclusion. 

Prediction 8: Crude oil falls, and will still fall below $60/bbl in the medium term

The Federal Reserve has raised interest rates sharply in a row, which has further aggravated investors' concerns about the impact of the economic recession on energy demand. It is expected that after short-term fluctuations, the oil price will still fall below $60/bbl in the medium term.

Prediction 9: The US bond market will be a bull market in 2023, and the 10-year US bond yield may be 3%

In 2023, the US economy is under recessionary pressure, the unemployment rate is rising and inflation is going down. After the completion of small interest rate hikes in December 2022 and early 2023, it is expected that the cycle of interest rate hikes will stop, and the longs will gain confidence. The 10-year US bond yield is likely to reach 3%.

Prediction 10: China's bond yields will consolidate first and then go down

The recovery of the real estate in 2023 means that the financing demand will pick up, and the bond yields will rise slightly compared with 2022. However, considering that monetary policy is unlikely to tighten, it is expected that the upper limit of yields will be controllable. There are two waves of opportunities to go long. The first wave is after the end of the expected hype and the intensive release of economic data, and the government bonds will repair from oversold; the second wave is after the global recession in the second half of the year which translates into overseas demand pressure, and the bond yields will pull back.