The wisdom of crowds can be powerful. But in times of heightened uncertainty, it can be helpful to understand potential risks.
At the moment, markets appear to be crystallising around a hopeful outlook for 2023. Asset prices suggest inflation will begin to subside quickly, the US Federal Reserve will become less hawkish and global growth will not be that much weaker than in 2022. However, monetary policy is fluid, geopolitical uncertainty is high, and strong labour markets are being offset by weakness in housing and other areas. Together, this allows for a range of possible outcomes.
There are four contrarian scenarios in which our economists think current market consensus, as reflected in asset prices, may not be the most probable outcome.