2023 macro outlook:
US 2Y interest rates expected to touch 5%, the first time in a decade. We are in a change of regime environment, where free money is no longer available Market participants still expect Fed to revert policy on economic slowdown
likely peaked in mid 2022 and continue to slide down to <4% 2. Fed will keep real rates positive, after a long time 3. repo rate ~5%, inflation ~4%, real rate : 1% 4. Yield curve would remain inverted and may invert further to -100 bps
Earnings and valuations:
1. S&P 500 earnings may correct by 10-20% 2. Forward earnings multiple may come down to 15x 3. Crypto start to get valued on potential cashflows
Asset Class Performance
Crypto: BTC ETH
BTC ushered in an era of expanding liquidity with zero interest rates around the world. That regime is over! Market participants would likely take longer to appreciate this.
In a tightening liquidity environment with positive real rates, BTC
may further go down. The first half is going to be difficult There are still alt coin projects with no use case. Alts may correct further. Projects with cashflows would perform better. ETH will outperform BTC
Equities SPX NDX GOLD
1. Developed EQ ~20% correction 2. EM EQ would rebound sharper
1. Crude will consolidate during recession and sharply bounce back as demand comes back 2. Precious metals (Gold and Silver) underperform
1. S&P 500 : 3000-3300 2. Nasdaq 100 : 6500-7000 3. BTC : 9500-10500 4. ETH : 800-1000This post is based on this twitter thread.