The Roaring Twenties Are Now Over. Time to Get Real.

What to Expect in 2023
It’s hard to believe that the post-Covid world at one point was supposed to usher in a new consumer-led boom worthy of the “Roaring Twenties.” Instead, crises have only kept piling up, from war to inflation, triggering disparate, overlapping shocks. Some call it a “polycrisis.”

Societies have shown themselves remarkably able to adapt. Inflation is showing signs of easing — a relief. But Pictet Asset Management strategists still expect global growth to slow to 1.7% in 2023, with stagnation in most developed economies and outright recession in Europe.

The “Realistic” Twenties has less of a ring to it, but that’s a more likely view of next year.

On financial markets, investment froth and euphoria worthy of the flappers have been forcibly brought down to earth by interest-rate hikes. Cryptocurrencies, unprofitable tech and real estate have been hammered and will remain unloved. Pension funds investing in risky three-letter trades like FTX (crypto) or LDI (derivatives) have learned costly lessons.

Policy realism is also setting in. Instead of fueling radical solutions, the aftermath of this bursting of leveraged market bubbles will see governments and policymakers get pushed towards the economic mainstream. That’s effectively what happened during the UK’s mini-budget crisis, which deflated the high-spending aspirations of the Brexiteers.