Jan. 2, 2023 — Chosun Ilbo asks about the new year (in Korean).
Q: There are various opinions on the possibility of an economic downturn. Do you have a positive or pessimistic for the economy in 2023? How likely is it that there will be a recession this year in terms of percentage?
JF: A slowdown in the world economy is very likely over the next few years, due to higher interest rates. The outlook is worse in Europe and East Asia than in the US, because they are more vulnerable to high prices for oil and other commodities. However, I am less pessimistic than the many observers who talk as if a recession in 2023 is certain. I put the odds of a recession in the coming year at no worse than 50 %.
Q: What do you think will be the biggest variable in the world economy in 2023?
JF: The biggest uncertainty is the outcome of Russia’s war in Ukraine.
Q: What do you predict for the market for the year? (Compared to now, how volatile will the S&P500 be in 2023?)
JF: Forecasters love to predict that volatility will be high, to avoid having to reveal that they have no idea whether the market will go up or down. My best guess was that the S&P500 was far too high as of 2021, and my best guess now is that the decline in 2022 was only a partial correction. That is, stock markets may have farther to fall.
Q: What is one industry/area you see as most promising in 2023? What is an industry/area that will start to shrink?
JF: Renewable energy will continue its rapid expansion. The crypto world will shrink.
Q: How should governments respond to our current economic situation?
JF: Governments have made many mistakes. Europe made itself dependent on Russian energy during 2011-21; Russia invaded Ukraine in February; China clung to its futile zero-Covid campaign; the US turned its back on free trade; and the UK went wrong when it held its Brexit referendum. The quality of recent policy-making in Brazil, Mexico, India, South Africa, and Turkey has been poor as well. Most of these countries are democracies, where the citizenry has the power to choose better leaders.