Economy
China’s infrastructure investment growth rate will likely slow from its current nominal 14% to 4-6% in 2023H1, on a year-over-year basis. Funding constraints and a shrinking pool of good projects will cap the upside in China’s overall infrastructure fixed-asset investment (FAI) in the next six months.
Labor market strength and consumers’ evident willingness to dip into their pandemic savings keep our optimistic consumer thesis intact. We remain tactically overweight equities.
European inflation will decline through 2023, which will greatly help households and consumption. But can European inflation remain low after that?
Our best calls of the year were long defensives over cyclicals, short Russia and emerging Europe, long aerospace/defense, short Greater China, and long Latin America. Our worst call of the year was long cyber security stocks.
Commodity currencies have been rather resilient, despite the broad rise in the dollar this year. In our view, we are about to experience a big rotation in commodity currency market performance at the crosses, from NZD, to CAD and finally to AUD.