Global Economic Forecasts: Q3 2023


Key Points
As we approach mid-2023, the US economy has been the subject of much speculation among economists and investment banks. The prevailing assessment, based on the Federal Reserve’s (Fed) aggressive hawkish monetary policy, was that the US economy would enter a recession phase.However, we have different views on real estate, the stock market, and Bitcoin.


Real Estate

Strong household financial conditions among affluent segments have contributed to the prosperity of the real estate market. Strict regulations on mortgage lending post-financial crisis have helped exclude buyers with poor credit, allowing wealthier households to comfortably afford higher loan amounts. Additionally, many borrowers have locked in fixed interest rates, benefiting from historically low rates. As a result, even with rising interest rates, the overall debt-to-income ratio for wealthy countries remains below pre-pandemic levels. This factor has resulted in fewer forced downsizing or property sales compared to previous housing market downturns.


After hitting bottom last year, consumer confidence in wealthy countries has rebounded. On average, households still hold substantial excess savings. Structural housing shortages also mean that even if some individuals cannot afford to buy, there will always be buyers in the market. There are currently no signs indicating a decrease in consumer preferences for home offices or home fitness. The boom period for real estate may have ended, but it hasn’t come crashing down dramatically.


US Stocks

As of May 2023, the year-on-year inflation rate in the United States has dropped to 4.0%. While core services, particularly the Shelter category, which holds the highest weightage of 34.4%, have yet to show a significant decline in statistical terms, real estate market statistics from sources such as Apartment List and Redfin indicate a gradual decrease in rental prices after a peak and subsequent stabilization. This suggests that over time, core inflation in the United States will gradually ease. However, it is likely that it will take until the fourth quarter of 2023 to reach below 3%.


Nevertheless, overall inflation is highly probable to continue cooling in the third quarter. If US inflation has already cooled to 4.0%, this would imply that the US dollar’s interest rates have reached the same level. Since real interest rates are no longer in negative territory, the Federal Reserve may see no need to continue raising interest rates immediately and can observe the situation further before making further decisions, and U.S. stocks will also rise accordingly.


BTC (Crypto Markets)

At present, Bitcoin has lost more than 70% of its all-time high value, at least close to the digital asset; then considering the performance of Bitcoin over the years and the trend that seems to be formed, it shows that the bottom is already in place. If this trend continues, Bitcoin may outperform the market again in 2023-2025, so the peak of the next bull market will be between 2024-2025, and the digital asset is expected to achieve at least double digits in these years growth of.


Experts predict that Bitcoin will reach $100,000 as soon as 2022, and after the black swan in 2022, Bitcoin will almost be cut in half. In 2023, BTC has shown some signs of stabilization, but it is not out of danger yet, and the encryption market is expected to be more and more in line with the development of global stock markets and economies. Bitcoin’s supply is growing by about 2.5% per year, while demand is growing faster, and after the 2020 BTC halving, the new supply of BTC will decrease, causing the price prediction market capitalization to soar to more than $1 trillion. Increased market demand will lead to more drastic price changes.


While the US economy faced recessionary pressures in the first half of 2022, it managed to rebound and show positive growth rates compared to the previous year.The key question moving forward is when the Federal Reserve will halt its interest rate hikes and pause its hawkish monetary policy. Key indicators such as price volatility, inflation, and employment data play crucial roles in the Fed’s decision-making process.