Allianz

About Allianz

#1
Slow Down
In 2023, we continue to forecast a mild recession in Europe on the back of the energy crisis, and in the US due to the abrupt normalization of monetary and financial conditions
This triaging recession will test resilience
Stronger balance sheets, demand backlog, and fiscal support will help limit the damage
In the emerging world, growth is expected to remain stable in 2023
In 2024, we anticipate a recovery in the US while the eurozone could be stuck in a muddle-through scenario because of the energy stop-and-go
#2
Cold Heart
The energy gap will continue to pose concerns in Europe
After record gas storage and energy efficiency gains helped avoid a blackout scenario in 2022, prospects for next winter (2023-2024) are limited as substitution to Russian gas imports will not suffice
Uncertain gas supply will create negative confidence effects and put the region’s fiscal capabilities to the test to cushion the impact of high electricity prices on firms and households
It will also compel policymakers to find ways to enhance energy efficiency and stabilize gas consumption beyond near term savings, together
The alternative is a repeat of 2012 and a risk of fragmentation in Europe
#3
Bad Blood
(Geo)politics made a bursting comeback at the forefront of concerns
From a split Congress and a noticeable return to good ‘ole protectionism through the Inflation Reduction Act (IRA) in the US, to Europe’s red herring policies to the negative competitiveness shock stemming from the energy crisis (sovereignty, re-industrialization), to China’s balancing act to exit zero-Covid, and the many important elections upcoming , investors and corporates will have to play coping strategies and buffers
#4
Dragon Attack
The shift in China’s containment measures will alleviate pressures on a slowing global trade, and accelerate the decline of producer prices
The domestic post-Covid rebound could start to be felt in the second half of 2023, and into 2024 as we expect sanitary restrictions to be eased in spring 2023
A faster easing would benefit the global economy while any setback could weigh on global trade and delay the easing of inflationary pressures
#5
Never Give Up
Emerging markets will face very different challenges and headwinds in the coming months
Political risk has been rising in Latin America, Eastern European countries are being hit harder than most by the energy crisis, and commodity importers throughout the world will have to cope with a strong dollar, high energy and food prices
Credible policy moves will make the difference
Debt sustainability concerns are increasing for some countries in a context of increasing rates and capital flight to safety
#6
Castle on the Hill
Central bankers are determined to fight inflation and make sure that it does not become entrenched
While the current hiking path is about to moderate, central banks’ independence will be tested either way: if erring on the side of keeping their monetary stance more restrictive for longer despite a looming recession, or if throwing in the towel to early and risking stagflation for good
Against the background of moderate quantitative tightening and decreasing system-wide liquidity, there is a risk of squeeze from a policy mistake
#7
Bad Habits
Since 2020, the war against the virus, and now against Russia have one super weapon: fiscal spending
It will remain at the center stage over the next couple of years, from relief measures to the cost of living crisis, to green industrial policies to help with silent wars (climate change, ageing), to fighting the urge to a massive tax policy U-turn
More targeting for aid, and fewer distortions are welcome to avoid that financial markets become very selective
#8
Easy on Me
In 2022, capital markets experienced an unmitigated disaster with an unprecedented price correction in both equities and fixed income
Going forward, earnings forecasts still seem too benign, and even a milder recession is not fully priced in
Fixed income is back but mind the risk
Also, as central banks drain excess system-wide liquidity and trading volumes even in historically liquid markets decline, financial accidents needs to be watched out for