by Jeffey Kleintop, Chief Global Strategist, Charles Schwab & Company Ltd.
Markets may continue to see volatility in 2023 as they navigate between global economic growth and inflation fears, with central banks' decreasing rate hikes and China's reopening.
- The U.S. Federal Reserve has signaled a slowdown in the pace of rate hikes from 75 basis points (bps) in November to 50 bps in December.
- The Bank of Canada stepped down from 75 bps to 50 bps in late October.
- The central banks of Australia and Norway stepped down from 50 bps to 25 bps at their meetings in October/November.
- The central bank of one of the largest emerging market economies, Brazil, and the central bank for the largest emerging market economy in Europe, Poland, both paused, leaving rates unchanged.
All of these central banks meet again to set rates during the next two weeks.
The chart below shows the pace of rate hikes for major central banks—notice that the bars are getting smaller as rate hikes moderate. The shaded column for December reflects current market-based forecasts for the upcoming rate-setting meetings and blank columns reflect months without scheduled central bank rate-setting meetings (see Central Banks Stepping Down for more on our thoughts on the end of rate hikes).
Rate hikes getting smaller in size
Source: Charles Schwab, Bloomberg, as of 12/2/2022.
*The market-based forecasts contained herein are for illustrative purposes only, may be based upon proprietary research and are developed through analysis of historical public data. Blank columns reflect months without scheduled central bank rate setting meetings.
Global leading indicators point to global recession
Source: Charles Schwab, Organization for Economic Cooperation and Development, Bloomberg data as of 12/2/2022.
Global PMI slipped into recession territory in Q3
Source: Charles Schwab, S&P Global, Bloomberg data as of 12/2/2022.
Big risk for 2023
Pent-up consumer demand?
Source: Charles Schwab, National Bureau of Statistics for China, Bloomberg data as of 11/17/2022.
Investing in 2023
High-dividend-paying stocks outperforming overall market by wide margin
Source: Charles Schwab, Bloomberg data as of 12/1/2022.
Indexes are unmanaged, do not incur management fees, costs and expenses, and cannot be invested in directly. Past performance is no guarantee of future results.
Short duration stocks outperforming long duration stocks
Source: Charles Schwab, FactSet data as of 12/2/2022.
Universe of stocks for quality/duration screen is MSCI World Index. Past performance is no guarantee of future results.
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