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The Top Trades in 2023? Global Week Ahead

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In the Global Week Ahead, the state of the U.S. housing market is one focus.

In Europe, unusually cold weather has raised concerns of electricity outages and renewed anxiety about energy costs.

In Asia, the Bank of Japan (BoJ) will be the last of the major developed country central banks to hold a policy meeting this year.

Finally, central bank policy-makers in emerging economies also mark the year-end, with policy rate decisions.

Next are Reuters’ five world market themes, reordered for equity traders—

(1) The Top Trades in 2023?

'Tis the season to be bullish about the year ahead, at least if you sell stocks for a living.

With recessions looming in the United States and Europe, however, money managers expect another poor year for equities and are huddling around lower-risk trades.

Investors surveyed by Deutsche Bank predict a -2.2% fall for the S&P500 next year, citing a worse-than-expected recession.

One trend many agree on is that inflation will subside, powering enthusiasm for U.S. Treasuries and investment grade corporate credit following a rout in 2022.

Expectations of a softer dollar as the U.S. economy slows have sparked optimism about emerging markets, which should also benefit from China easing COVID-19 restrictions.

Money managers are widely betting on the yen against the dollar, as speculation mounts that the BoJ will move away from its ultra-dovish monetary policies.

(2) Incoming U.S. Macro Data, with a Housing Focus.

Can the United States ward off a recession as consumer prices come off the boil?

Investors get a fresh read-out on the world's top economy and its inflation pressures on Tuesday when November Housing Starts and Existing Home Sales numbers are due.

In October, rising mortgage rates saw U.S. existing home sales sink for a record ninth straight month, home-building fell sharply with single-family projects dropping to a near 2-1/2 year low.

Wednesday will see the Conference Board consumer confidence survey, which slipped to a four-month low in November. The reading for the Personal Consumption Expenditures (PCE) index is also for release on Dec. 23rd after recent inflation data came in softer-than-expected.

(3) Winter in Europe. Causing the Risk of Blackouts to Rise.

A cold snap in Europe raises the risk of electricity blackouts that could exacerbate pain inflicted by the energy shock and high inflation.

It also tests Europe's resolve to save energy and mitigate the economic impact of the Ukraine war.

Europe's gas storage is almost 90% full after European Union governments acted to build reserves following disruption of Russian supplies, but a series of nuclear outages, especially in France, has added to nervousness of electricity outages.

France is striving to avert power cuts, and Germany is bleeding cash to keep the lights on.

Emmanuel Macron says it was absurd to worry that blackouts would cripple infrastructure, while officials warn of possible outages and France's Banking Federation said cash machines would be affected.

Traders, trying to assess how deep Europe's economic slowdown will prove, should pay attention to the weather report.

(4) When Does the Bank of Japan (BoJ) Pivot?

Even the uber-dovish Bank of Japan has not been spared from investors trying to pick central bank pivot points.

A shock acceleration in Tokyo consumer prices to the fastest pace in 40 years has emboldened some to short Japanese government bonds ahead of Tuesday's policy decision.

Speculation was heightened by rare hints from policy board members that it might be time to review ultra-easy stimulus settings.

But BOJ watchers say a shift will not happen until Governor Haruhiko Kuroda steps down in April after a decade at the helm.

There's good reason to take it slow: the recovery is fragile and inflation, while high, is nowhere near European and U.S. levels.

And nationwide CPI data will only be due after the policy decision — made public on Friday.

(5) A Set of Emerging Market Central Banks Also Meet on Policy Rates.

A set of emerging market central banks will mark the end to a year, in which the scale and pace of rate hikes in developing economies hit multi-year highs.

In emerging Europe, where inflation pressures are still persistent, policy makers in Hungary and the Czech Republic are set to meet on Tuesday and Wednesday, both of which held rates stable at the last meetings but pledged to tackle inflation.

Thursday has meetings scheduled for Indonesia — where the central bank has just seen growth added to its mandate — as well as Egypt, which is in line for support from the International Monetary Fund.

Outlier Turkey is due to make a decision the same day, though watchers expect no change after rates were lowered to single digits ahead of next year's election despite rising inflation.

Zacks #1 Rank (STRONG BUY) Stocks

Given the major recession fear out there, I found three names on our list this week that surprised me.

(1) Dillard’s (DDS - Free Report) : This is a $310 a share, Regional Department Store group, with a market cap of $5.4B. I see a Zacks Value score of A, a Zacks Growth score of B and a Zacks Momentum score of A.

(2) United Bankshares (UBSI - Free Report) : This is a $38 a share, Southeast U.S. Bank, with a market cap of $5.3B. I see a Zacks Value score of C, a Zacks Growth score of C and a Zacks Momentum score of F.

(3) International Game Technology (IGT - Free Report) : This is a $24 a share, Consumer Discretionary-Gaming firm, with a market cap of 5.0B. I see a Zacks Value score of A, a Zacks Growth score of C and a Zacks Momentum score of D.

Key Global Macro

Not much — in terms or both macro data and policy events — will be market-moving this week, I wager.

On Monday, the U.S. NAHB housing index came in at a disappointing 31, expected to have reached 36 from 33 in November. These figures were already looking poor on projections, and have come in even worse.

Meanwhile, the German IFO indices came out higher than anticipated. Business Climate came in at 88.6, above the 85.2 consensus. Current Assessment rose to 94.4 from an expected 93.6, and Expectations reached 83.2 from 77.7 analysts were looking for. Even better than the improvements that were expected.

On Tuesday, we get a People’s Bank of China (PBoC) rate decision.

We get a Bank of Japan (BoJ) rate decision and a press conference too.

U.S. Building Permits and Housing Starts come out. OCT had 1.512M and 1.425M respectively. NOV should show similar marks.

On Wednesday, U.S. existing home sales for NOV come out. I see 4.42M is consensus, in line with OCT’s 4.43M.

On Thursday, the Chicago Fed National Activity Index for NOV should be -0.01, after -0.05 in OCT. Not much of a slowdown happening. Yet.

On Friday, the U.S. core Personal Consumption Expenditure (PCE) data comes out. I see a call of +4.6% for NOV, identical to the +4.6% in OCT. This is the Fed’s preferred consumer price inflation measure.


This will be the last Global Week Ahead for 2022.

The New Year of 2023 — offering more Global Week Ahead writing — will surely arrive.

The year ahead will show all of us its fair share of challenges, in the financial markets, in geopolitics, and within economies large and small.

There are also many salient 2023 era reasons to keep hopeful and remain optimistic.

Challenges deliver an edge to those who meet them.

Have a Nice Xmas holiday week!

Warm Regards,

John Blank
Zacks Chief Equity Strategist and Economist

See More Zacks Research for These Tickers

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