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???The macroeconomic situation continues to worsen – both the Fed and market participants are downgrading forecasts regarding the dynamics of GDP and unemployment in the USA in 2023. Inflation dynamics (primarily, core inflation) remains more stable compared to the expectations of the regulator and market participants.

In our opinion, the general stock market situation is in favor of maintaining a bearish sentiment for next few quarters, until recession risks actually materialize or until they are removed. Besides, we do not exclude local strong impulses if the Fed is signaling that it is willing to pause the cycle of rate cuts, or when the regulator details the actual terminal rate, or in case of pronounced progress in inflation dynamics in the coming months.

?????Taking into account political risks persisting in the energy sector, coordinated actions of OPEC+, and medium-term drivers favorable for the country, together with some of the best stock market results (CAGR of quotations since 2007 is 10%, since 2017 is 14%) and profound protective features during declines in the US market, we prefer the UAE market. Currency risks do not threaten the UAE, as the exchange rate is linked tightly to the USD.

Developed markets:??Business activity and macro forecasts are deteriorating, the probability of a recession/ moderate recession in the region is growing, inflationary pressure is more stable compared to the expectations, restrictive monetary policy is likely to persist in the near future.

???? Forecasts for the dynamics of US GDP growth are worsening, core inflation is showing stability, despite declined multipliers, which are near fair levels, the consensus forecast implies EPS growth of 8% in 2023, which looks unrealistic in the current conditions.

???? Inflation indices in the Eurozone continue to update historical peak values, purchasing manager indices have consolidated below 50 points, manufacturing production is declining. The European region is actually on the verge of recession besides, it faces the risk of energy shortage, which will put pressure on business activity and consumer sentiment.

???? Japan?stands out among developed countries with the best inflation situation – the Central Bank of Japan maintains ultra-soft monetary policy, while the strengthening of the dollar puts pressure on investment results, besides, the weak dynamics of global GDP, as well as the GDPs of the USA and China, will put pressure on Japan.

Other developing markets:?Emerging markets are facing similar troubles: inflation is rising, business activity is under pressure amid worsening outlook for global GDP in 2023, local currencies are also under pressure in the context of the strengthening US dollar.

???? The Chinese market remains unstable, and we believe that the current measures of the authorities to support the Chinese economy are insufficient to accelerate economic growth. The risks associated with maintaining Covid restrictions and severe market regulation persist. However, an accelerated economic growth is expected in 2023.

???? India is actually the second economic driver in the region. The medium-term factors of the stock market growth remain the same as before: diversified economy, favorable investment environment that stimulates money inflows. At the same time, during periods of US market downturn, the Indian market shows weaker results versus the US market (but better than EM) and is also characterized by higher volatility.

???? The theses on the Indonesian market are generally similar to those on the Indian one, while the first looks more stable during periods of US market decline. However, the stock index of Indonesia shows weak market results over the past 10 and 15 years.

???? Despite a leading position in the region, Brazil demonstrates low economic growth, weak dynamics of quotations (CAGR from 2010 to 2022 was -5%, since 2015 +1%), while the regional index shows good results in the periods of US market decline, and also has low estimates regarding 15-year averages.

???? The Korean market, despite the leadership in some technology sectors, has been showing steady negative dynamics (in USD) since 2015 and zero movement since 2007, which, coupled with low parameters in the context of a decline in the US stock market and increased volatility, makes the Korean index unattractive in current conditions.

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