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A Macroeconomic SWOT

The latest macroeconomic reports from the OECD, the IMF, the Federal Reserve, the ECB, the Conference Board, and Markit, amongst other sources, indicate a broad, inescapable consensus: 2023 is going to be a (very) slow year from a GDP growth point of view (in real terms).

This collection of economists does not leave much room for a contrarian perspective on the outlook. Where I dare to differ is in its appreciation. The ‘gathering dark clouds’ and ‘winter is coming’ analogies peppered with ‘risk tilted to the downside’ comments abound. Even economists enjoy a sensationalist touch. But, purely economically speaking, 2023 does not need to be dramatic.

The homemade ‘SWOT’ analysis below identifies the major economic forces at play in the short and longer term. Considered holistically, the macro picture appears to be reasonably balanced.

As a result, 2023 is expected to be essentially flat from an economic growth perspective in the US and Europe. At the global level, (real) GDP growth is expected to reach 2%, significantly below the historical 3-3.5% GDP growth p.a. range.

The trough in sentiment may occur in Q1, to be followed by some relief, if not mild euphoria assuming a combination of declining (i) energy prices (after the cold winter months), (ii) inflation rates, (iii) policy rates, and, possibly, (iv) COVID restrictions in China associated with a benign 2024 outlook.

Such improving sentiment may pave the way for lower market volatility and a rise in M&A and equity market transactions, especially considering the significant backlog: after all, in every industry around the world, there is a race to sustainability requiring significant corporate portfolio changes, as argued in M&A’s Best Days Lie Ahead.’

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