Global markets face very difficult economic conditions

[Don't expect a quick rebound in the stock market]

The new strategy of the world's major central banks is to moderately raise interest rates and maintain them at a moderately high level for a longer period of time, as long as inflation does not return to near the inflation target. Given the inertia of core inflation, we should actually expect rates to remain moderately high for an extended period. During this period, the unemployment rate will rise until it exceeds the level of structural unemployment. With unemployment rising and economic growth continuing to be weak, it's hard to imagine a significant recovery in stocks.

[Central banks are buying gold wildly, geopolitical tensions]

Central banks are buying gold at the fastest pace since 1967. Data compiled by the World Gold Council show gold demand has surpassed any year in 55 years. Adrian Ash, director of research at bullionvault, a gold trading market, said the rush of central banks to buy gold showed that the geopolitical situation was full of uncertainty and mistrust after the United States and its allies froze Russia's dollar reserves. The last time gold bought at this level marked a historic turning point in the global monetary system.

[US stocks are expected to rise next year]

Economists at JPMorgan Chase believe that U.S. stocks have already solved the troubles before the macro problems in 2023, and now they seem more and more attractive. While we don't think the stock market has bottomed out, we do think the risk-to-reward ratio for stocks has improved in 2023 given the decline in 2022. With quite a bit of bad news already priced in, we see the chances of further declines as more limited than in early 2022. Importantly, the probability of a rise in U.S. stocks by the end of next year has increased enough to be the base case.

[German exporters expect challenges in 2023]

German exporters have little hope for next year, with rising coronavirus infections expected to cause problems for key customers in China, while higher prices make U.S. buyers wary, the German Foreign Trade Association (BGA) said. Exports will not decline in 2023, but we cannot expect a substantial increase either. If we can achieve a 'black zero' (trade balance or surplus), it will be a success. BGA Chairman Dirk Jandura said the euro strengthened again due to the ECB raising interest rates. This will not boost exports.

[Massive strikes in the UK wreak havoc]

British government spokesman David Davis expressed the hope that the strike will end, because the strike has caused huge damage and the government does not want to see the current situation continue to deteriorate. At the same time, the British Border Force and railway workers also launched new strikes on the 28th, and British nurses and ambulance workers plan to strike again in January next year. The problem of inflation in the UK remains high, and the cost of living continues to rise. In December alone, there were strikes almost every day in the UK, and most of them came from the public service sector.

[Eurozone faces very difficult economic situation]

Given that inflation remains high and the European Central Bank continues to tighten its policy, the firm attitude of the ECB officials on raising interest rates is the basis for supporting the euro in the near future. The euro zone is going through a "short and mild recession" before economic growth restarts in the second quarter of next year. , the euro zone faces a "very difficult economic situation."

[BoJ maintains loose policy]

The BOJ should maintain its current accommodative policy stance by buying JGBs. If this situation continues, it may have a negative impact on financial conditions such as corporate bond issuance conditions and hinder the transmission of monetary easing effects. The Bank of Japan decided it would continue to control the yield curve, but widened the range of fluctuations in the 10-year JGB yield from the target level. It also confuses the yen bulls, causing the dollar to enter the rhythm of rebound trading against the yen for several trading days.