2022 Q4 Commentary: The Future is Always Uncertain

  • 2022 was a year of non-linear recovery which incorporated significant political, financial, investment and human turmoil. Many of us are glad that 2022 is behind us, but time is a human construct.  There is nothing that forces a reversal of events or redirection simply because we crossed over to another day, which just happens to be the first day of a new calendar year.  The conditions on the ground have not shifted a bit, so the end of the fourth quarter and the beginning of the first quarter are just a passage of time and do not materially change any factors or the path upon which the global economy has been traveling.
  • Uncertainty about central banks’ monetary policies in their attempt to respond and contain inflation and how the markets will anticipate and respond remain omnipresence. Will the U.S. end in a soft landing or a hard landing/recession?  Perhaps a recession is a good outcome, allowing the economy to cleanse and start anew. Will we be in stagflation for an extended period with elevated inflation and sub-trend growth?
  • The humanitarian crisis in Ukraine and continuing economic and trade fallout can stop at any time or carry on for years to come.  What is clear is that Russia’s desire to contain NATO expansion has backfired with Finland and Sweden applying to join the alliance. Nonetheless, without an off-ramp for Putin, it is hard to see when and how the war will end.
  • Regardless of the rhetoric of supporting the One China Policy1, the ground has shifted much since 1979 with the rise of China and the growing U.S. view of China as more than a strategic competitor (made in part as a response to a more muscular China globally, especially the South and East China Sea expansion).  The words and deeds taken by the U.S. against the PRC and the significant additional support, politically and militarily, as well as trade and other exchanges for Taiwan have caused all to focus on the China-Taiwan relations.  This is made more pronounced in the post Russian-Ukraine world.  The geopolitical tension between the two largest world economies is adding risks and uncertainties to geopolitics, trade, finance, and alliances globally.  Although both sides are not interested in erupting into a hot war, the ever ratcheting up of rhetoric and actions and counteractions are moving the world ever closer to an accidental war.

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