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What's clear is that the government is looking desperate when it comes to the economy. In a recent note, China Beige Book pointed out that China's most worrisome long-term economic problems remain. Its largest growth engine and asset class, property, is. That has all sorts of ripple effects throughout the economy, such as starving local governments and depressing commodity prices for construction.
Desperate economic times call for desperate economic measures. It may take years to get the Chinese consumer, on which Wall Street has placed so many hopes, back to the strength of yesteryear. As the China Beige Book analysts wrote,"economic acceleration is not imminent and, when it does begin in the second quarter, will come from a low base by the standards of the past 40 years."To be fair, not every Wall Street analyst is looking sheepish right now.
"While a recession is a very real possibility, investors may be surprised by the resilience of the global economy — even with such a sharp tightening in financial conditions," they wrote in their look-ahead."The labor market will certainly cool, but healthy household balance sheets should continue to support spending in the services.
Almost a decade ago, when I started reporting on the economy, a legendary hedge-fund manager caught me on TV making a grand prediction about the year ahead. They immediately admonished me. The difference between analysis and prediction, they said, is the difference between knowledge you can know and knowledge you can't know. There are too many independent variables at play to forecast what will happen to the world and the market over an entire year.
Economic conditions were simpler and stabler in 2014, but commanding that analysis was still a stretch of Wall Street's imagination. In 2023's more complicated landscape, anybody caught making a prediction — myself included — should be prepared for the moment the market hands them a red rubber nose and some floppy shoes. The beclowning is already happening, and it will happen all year long.
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