Economy

Workers have a cyclical wind at their backs as labor demand exceeds supply, but a wage-price spiral is no more than a remote possibility. The structural backdrop has turned significantly against them since the last bout of high inflation 40-plus years ago and they are no longer price makers.

Relative to beaten-down expectations, global growth will surprise on the upside in 2023. Investors should overweight equities for now but look to turn more defensive in the second half of the year.

How to play China's reopening? What are the dichotomies in the performance of China's plays in financial markets? Why has the Chinese central bank tightened liquidity since October and what has been the impact on local rates and the RMB? Is global growth about to bottom? What is the outlook for EM stocks, currencies, credit markets as well as the broad-trade weighted US dollar?

China's economic recovery will be led by consumer spending on services rather than the industrial sector. The current equity market leadership – outperformance by tech stocks – is unsustainable. Persistent deflationary forces will compel policymakers to inject more liquidity and bring down interest rates to reflate the economy. Hence, the RMB will resume its decline against the USD soon.