Limping into 2023

Another big year ahead though

Stock markets are limping into 2023, with investors seemingly making the most of the festive break to refuel for what is going to be another wild year.

Equities are a little lower on the final trading day of the year but broadly speaking, over the last week there has been no development, just choppy trading with no conviction or direction. It would appear investors are positioned for an opening quarter of significant uncertainty, which is about right.

So much now hangs on the economic data and how companies plan to adapt to a potentially impending recession. The data towards the back end of 2022 wasn’t as promising as hoped and the communication from the Fed and others has remained more hawkish than investors would like.

China’s move away from zero-Covid doesn’t appear to be going to plan with anecdotal evidence suggesting cases are soaring and the health system is being stretched. If it weathers the storm over the next month or so, it could bode well for the rest of the year but past evidence suggests the road to zero restrictions is filled with potholes.

The decision by the BoJ to tweak its yield curve control policy tool could also backfire as traders view it as the first step towards abandoning it altogether. It may be forced to be even more active in the markets as a result as emboldened JGB bears seek to test the central bank’s resolve.

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Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam