The global economy and markets were rattled by two significant shocks in 2022: an inflation shock and an interest rate shock. Going into 2023, one expected shock remains: recession. Amid this backdrop, Bank of America (BofA) Global Research economists and strategists released their outlook for 2023, noting the year should be a story of two halves. The United States, European Union and United Kingdom are all expected to see recessions next year, and the rest of the world should continue to weaken, with China a notable exception. The recession shock likely means corporate earnings and economic growth will come under pressure in the first half of the year, while at the same time, China’s reopening offers a reprieve for certain assets.
“This past year has seen significant market volatility due to surging inflation, geopolitical risks, and central banks hiking at paces not seen in decades,” said Candace Browning, head of BofA global research. “In 2023, inflation should com