The year is coming to an end for stock markets with a result not expected at the start of the year, with the majority of the primary world stock indices up by double-digit percentages; in some cases exceeding 20%. Here it has been observed on several occasions that stock market demand would depend mainly on expectations relating to two fundamental data, the dynamics of GDP and the inflation rate, linked to each other through the variable of the cost of money.
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If an alien investor descended on earth and examined the dynamics of the S&P 500 stock index this year, he would not be able to understand the fact that it has risen by almost 20%. In fact, for almost two years the majority of analyzes by experts at a global level have indicated an imminent economic recession induced by the marked increase in the cost of money decided by central banks to combat inflation.
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In September, the primary stock markets initiated a correction phase of between 5% and 10% from mid-summer highs, which was expected by insiders given the over-bought technical situation that has formed since the beginning of the year. In fact, taking the US S&P 500 index as an example, two levels of support were indicated at 4325 and 4200 as objectives for a possible moderate decline.
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The summer period for the international securities markets saw the issue of the inverted bond yield curve come home to roost. In this forum, already last autumn, it was observed that considering an economic recession to be imminent utilizing the slope of the long-term interest rate curve risked being misleading, as it is almost totally conditioned by the discount component of the duration, which is strongly negative.
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The primary international stock market indexes, in essence, continued the lateral movement that began in the aftermath of the mini banking crisis of early March, recording modest trading volumes and low volatility.
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The mini banking crisis that commenced in the USA at the end of the first week of March put an end to any restrictive ambition on the part of the international central banks.
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The alarm, unheeded, was probably sounded last September when the Bank of England had to intervene massively to support the value of its public debt, in free fall due to the government’s foolish fiscal policy decisions, which undermined the system’s liquidity.
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The strategic issue to be explored in order to position oneself adequately in terms of the distribution of securities investments for the current year concerns the possibility or not of a recession.
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The working hypothesis that the much acclaimed global economic recession which should have manifested itself during the winter, in reality was reduced to a modest technical episode last autumn, is starting to find authoritative consensus as evidenced by the upward revision of world GDP forecasts for 2023, just released by the IMF, which indicates growth of 3%, the same as in 2020.
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