For Economies “This Is Normal”, the WEF’s 2023 Risk Forecast, Holocaust Remembrance Day.

Good morning.

There’s some macroeconomic analysis that’s worth your time today (or over the weekend), plus a belated recommendation to read the WEF’s Global Risk Report if you haven’t already. Today is Holocaust Remembrance Day.

And thanks to everyone who voted on the layout. The overwhelming response was that you prefer having the analysis first so we’ll stick with this format and starting next week, I’m going to trim the commentary around the metrics unless there’s a big event or change. That should streamline things even more 

The Economy: Back to Normal or is a Bigger Change Underway?

In a recent interview, investor and formal market analyst Bill Gurley noted that the economic conditions we’re settling into are a reversion to what normal looks like. He pointed out that growth cycles are normally around seven years, so we were well overdue a correction now that the crash of 2008 is so far behind us. Therefore, according to Gurley, the economic conditions we’ll see over the next few years aren’t a pause before we get back to normal: this is normal and companies need to adapt accordingly.

Meanwhile, Howards Marks of Oaktree Capital has suggested that an even bigger change is underway and, instead of reverting to what a normal economy looks like, a bigger change is underway,

“In my 53 years in the investment world, I’ve seen a number of economic cycles, pendulum swings, manias and panics, bubbles and crashes, but I remember only two real sea changes.  I think we may be in the midst of a third one today.”

Marks includes this ‘then and now’ comparison in his memo but notes that the conditions in the 2009-2021 column also prevailed “for much of the last 40 years.”

Read his memo in full here

Of course, there’s more to the world than the US economy but many other countries have had similar conditions of zero or close to zero interest rates, high employment, and low inflation for many years. So while there’s belt-tightening going on around the globe, it’s worth spending some time considering these perspectives to determine if this is a short-term measure or if this is something everyone needs to adapt to. If it’s the latter, those who adapt fastest will significantly reduce their risk and be able to take advantage of the opportunities that arise. 

The WEF’s Global Risks Report 2023

The World Economic Forum / Marsh Global Risks Report 2023 came out a couple of weeks ago, so I am very late to the party in bringing it up but, if you’re like me and haven’t dug in yet, it’s well worth a read. As you’d expect, it’s beautifully produced, information-dense and full of great charts.

How Crises are Interrelated: (C) WEF

​​As the conflict between Russia and Ukraine approaches one year, economies and societies will not easily rebound from continued shocks. In this year’s Global Risks Perception Survey, more than four in five respondents anticipated consistent volatility over the next two years. The persistence of these crises is already reshaping the world that we live in, ushering in economic and technological fragmentation. A continued push for national resilience in strategic sectors will come at a cost – one that only a few economies can bear. Geopolitical dynamics are also creating significant headwinds for global cooperation, which often acts as a guardrail to these global risks.

The Full Report is available here

Holocaust Remembrance Day

Today is Holocaust Remembrance Day and the UK’s Holocaust Memorial Day Trust focus is on ordinary people: the ordinary people who were the victims and perpetrators of the Holocaust as well as the genocides that followed.

Ordinary people were involved in all aspects of the Holocaust, Nazi persecution of other groups, and in the genocides that took place in Cambodia, Rwanda, Bosnia and Darfur. Ordinary people were perpetrators, bystanders, rescuers, witnesses – and ordinary people were victims.

We are all ordinary people today who can be extraordinary in our actions. We can all make decisions to challenge prejudice, stand up to hatred, to speak out against identity-based persecution, to shop responsibly.

Ordinary people are also the ones who drive Holocaust Memorial Day, who lead on community commemorations, who support and encourage everyone around them to take part in remembrance and education projects.

On to the numbers

(Still not sure of how to use these metrics in your risk analysis? There’s a cheat sheet at the bottom of the email but the user’s guide is here. Want to know more? Read the white paper.)

Relative Values (90-Days)

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Trends (21-days)

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Commentary and Evaluation

Brent Crude

Potentially impacting: Fuel prices | Gound shipping costs. | Plastic prices | Changes to fuel subsidies (potentially leading to unrest) | Cost of living (especially transport and heating) | Changes to traffic volume/transportation choices | Demand for automotive products | Theft and smuggling.

(No change) Brent Crude remains mid-range for this 90-day interval. Prices increased moderately over the last 21 days after significant fluctuation.

What to Watch

(No change) Market commentary and analysis vary wildly about what oil will do in 2023 and the broad analysis I shared earlier holds for many: ‘prices will peak around $95 with an average of around $90, a drop from previous 2023 estimates which reflects a gloomy outlook for the year’. 

See Reuters for more

However, within that range, the opportunity for significant movements remain and China’s plans for a great economic boom are leading some to forecast oil moving up as high as $110 by Q3. The exact number is less important here than the reinforcement of the idea that China’s reopening will kick in soon and will lead to significant increases in demand for oil as well as other commodities by mid-year.

Iran remains worth watching as their motivation and ability to inflame tension in the Gulf remain. 

Talk of the rise of the petroyuan in 2023 is overblown. See this update for more

Iron and Steel

Potentially impacting: Cost of construction projects | Construction project timelines | Cost/availability of raw materials | Infrastructure project timelines/costs | Cost and availability of finished metal goods | Value of scrap | Value of 2nd hand equipment/vehicles.

(No change) Iron and Steel remain very high for this 90-day interval. Prices increased moderately over the last 21 days after slight fluctuation and continue to creep up. (Note that the Iron and Steel index is on the Taiwanese exchange, which is closed for lunar New Year so these values are from January 17.)

What to watch

(No change) The Chinese construction and manufacturing boom that many expected in 2023 is off to a very unsteady start as COVID spreads rapidly after December’s relaxations. Sectors that had struggled under the strict COVID restrictions are suffering just as much in the current laissez-faire environment. This is temporarily delaying the expected economic boom but many analysts expect things to take off in late Q1 meaning that demand for oil, shipping and commodities will all rise significantly thereafter.

See Bloomberg for more

Market Volatility (VIX-US)

Potentially impacting: Availability of capital for investment | Interest rates| Share prices | Consumer confidence | House prices/rent | Financial certainty/uncertainty | Financial models | Stock-based compensation values.

(No Change) Market Volatility (VIX) remains very low for this 90-day interval. The index decreased sharply over the last 21 days after significant fluctuation.

What to Watch

(No change) Messaging from the US Fed and ECB remain consistent and the end-of-year turbulence has faded, meaning that although the news in many sectors isn’t welcome, the general market conditions seem to have been broadly accepted and priced in. Layoffs continue in tech, banking and retail while some large brick-and-mortar stores, like Bed Bath and Beyond, seem to be slipping further into difficulty. So although decision-makers have greater clarity as to what lies ahead, economic conditions are grim for many and look to remain so for short- to mid-term.

However, negotiations around raising the US debt limit will be contentious and cause significant turbulence in the run up to hitting the ceiling, likely in late Q2, early Q3. See last Tuesday’s piece on debt limits for more. 


Potentially impacting: Bread, pasta, couscous & noodle prices | Changes to food subsidies (potentially leading to unrest) | Cost of living | Movement from low-income to food insecure to undernourished | Increased theft or graft in loosely governed areas | Demand on charities.

Wheat is mid-range for this 90-day interval as higher prices settle in. Prices increased moderately over the last 21 days after moderate fluctuation.

What to Watch

(No change) Despite agreements brokered by Turkey, Russia could still impose a complete blockade on Ukrainian grain exports to exert pressure on Kyiv and her allies. Meanwhile, even strict controls and inspections for outbound shipments mean that exports remain slowed. Moscow could also conduct military operations to disrupt spring planting meaning that prices could rise again next spring and summer. Read more in AGWeek  

Ocean Freight (FBX)

Potentially impacting: Supply chain costs (direct and indirect) | Supply chain delays | Port capacity/throughput speed | Customs clearance | Availability of goods and materials | Consumer demand/hoarding.

(No change) Shipping (FBX) remains very low for this 90-day interval. Prices ended relatively flat over the last 21 days after some fluctuation.

What to watch

(No change) China’s reopening and the effects of recessions on demand in the US and elsewhere remain the biggest issues to track but there are no definitive signs to watch at the moment. Chinese New Year will depress manufacturing and shipping volumes but expect these to rise significantly in late February once the celebrations are over.

🚢 Congratulations to our data partner Freightos which just listed on the NASDAQ

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How’d I do this week?

PS – If you’re looking for a quick digest of international news, take a look at International Intrigue. I’ve been reading them over the last week and really enjoying their coverage.

International Intrigue

The global affairs briefing you’ll actually look forward to reading.


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