What Is The Macroeconomic Roadmap For 2023?

July 03 3 min read

If a problem cannot be solved, enlarge it.

Dwight D. Eisenhower As 2022 started, my personal thesis was that inflation, notably food and fuel inflation, would be significant, providing U.S. Republicans with a significant advantage in the US mid-term elections. Meaningful events, notably the war in Ukraine, shifted the dialog and, in many cases, reinforced the inflation factors I was anticipating, but, in the end, my political hypothesis fell flat.

2023 is here, and my personal thesis is that rather than food, fuel, and inflation, the significant themes of 2023 will be employment and debt. In many ways, there is an abstract showdown between the forces of capital (debt) vs. the forces of labor (employment). Markets are anxiously awaiting a Fed pivot, which is necessary to bring debt burdens down and continue the rise of asset prices. For that to occur, unemployment rates will need to rise.

2023 will see a perverse situation where bad employment news will be good news for markets and vice versa. A rise in unemployment is the last missing piece for an official recession call, and while I believe that we may be in a recession currently, an official declaration will not be made in the first half of 2023, if in 2023 at all. This pushes the official recession (and recovery) to 2024, a presidential election year.

Below are market moving events of 2022, which I call the Five I’s. I will publish in-depth charts and notes later this year covering these events (and their implications) in detail.

  • Inventory – Supply Chain Reaction: A brief history of the Bullwhip Effect.
  • Inflation – Sticky & Flexible inflation in consumer goods and asset inflation for physical (automobiles and housing) and imaginary goods (stocks and crypto).
  • Incomes – Labor Shortages, the Great Resignation, and Quiet Quitting from Tang Ping to Bai Lan, we will cover the changing nature of employment that COVID revealed.
  • Interest Rates – From Zombie Companies to dollar milkshake theory, interest rates were the dominant issue of 2022. Will the Patagonia Vest Recession bleed to other markets?
  • Inversion – The biggest recession indicator flashed bright red in the latter half of 2022. Will this be the end of Quantitative Easing (QE) as we know it?

And here is my prediction of market-moving topics for this year, what I like to dub the ABC (DE)’s of 2023. The most significant part of my thesis is that those events of 2018-2022 will start to revert in rather wild swings that will play out over the next 24 months.

  1. Absorption – Liquidate inventories, liquidate labor. Will the Mellon Doctrine wreak havoc on office and industrial absorption and vacancies? We will throw in apartment and housing liquidation as well.
  2. Bonds – Negative interest rate bonds have been purged from the system in 2022, and for the first time, many investors will have to learn “Bond Math.” I predict record amounts of “normal people” will discover fixed-income investments for the first time.
  3. Consumption – The Reverse Wealth effect will hit consumers and businesses as a self-reinforcing recessionary cycle starts. Bad news is good news, and I have good news for people who love bad news.
  4. Debt – Rising borrowing costs (interest rates) will lead to rising debt levels for consumers, businesses, and governments. I predict we will hear a lot about government debt in 2023.
  5. Employment – Labor shortages are partly a statistical illusion as millions of people remain out of the labor force. Labor dislocations may remain a problem as the largest US generation (millennials) thinks about retirement and if it is even worth it, while the second largest generation (baby boomers) actually does it.


This piece serves as a roadmap for future articles for 2023 (and beyond), and the views and opinions expressed within are those of the author.

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