Investors continue to seek signs of a change in season—and clues about how the Federal Reserve might react to it.

Considering that a new year almost always brings surprises of one form or another, we've highlighted our top five that may define the global markets in 2023.

Inflation trends are moving in a favorable direction, but the change is likely too slow for the Fed to take its foot off the brake anytime soon.

Markets may continue to see volatility in 2023 as they navigate between global economic growth and inflation fears, with central banks' decreasing rate hikes and China's reopening.

Markets can have more sway over policymakers than vice versa, as demonstrated in the U.K. recently.

Although an economic rebound in China is underway according to government and private sector data, its economy and stock market may remain volatile.

Stock prices and bond yields have been moving in opposite directions this year.

The "end of globalization" is a phrase that has come up a lot lately.

For the past month, investors have been focused on the war on Ukraine and the economic impact of sanctions.

The past isn’t a perfect predictor of market behavior, but it has proven to be a useful guide.

The Russian invasion of Ukraine overturned a lot of assumptions about the near-term direction of the global economy.

Markets have already reacted to the threat of a Russian invasion of Ukraine in a textbook manner akin to prior similar events that we have outlined in prior articles on January 31 and February 22.

In an apparent desire to create a weakened border state unable to join NATO, Russia supported separatists in eastern Ukraine by recognizing the independence of two regions: Donetsk and Luhansk. In support, Russia ordered “peacekeeping” troops to the areas, prompting sanctions by world powers.

Most investors are probably less diversified than they think they are.

In recent weeks, it has felt like the U.S. stock market slips a gear every so often, dropping sharply as investors search for traction in uncertain terrain.

Markets appear to be reacting to military developments in Ukraine.

Last week, U.S. Treasury bond yields, climbed back to their pre-pandemic levels.

Despite the strong year for stocks in 2021, markets have confidently priced in some negative trends gathering more momentum in 2022 which may help markets, should trends reverse.

Some of the market’s recent pressures are showing signs of easing.

As we wrote about in our 2022 Global Outlook, COVID-19 is becoming endemic rather than pandemic. We anticipate a winter wave of COVID, potentially with new variants like omicron.

A high tide of growth, aided by a sea change in fiscal policy, is likely to help float the global economy safely over the rocks of risks in 2022, despite waves of worries emanating from COVID, inflation, shortages, and rate hikes.

After a year of supply shortages, the global economy may be closer to the end of the supply chain problems than the beginning.

Services make up more of the economy, jobs, and the stock market. The time has come to focus on services data to get a sense of the overall economic picture.

Looking ahead, new sources of inflation may continue to arise. Unless the mounting pressures push inflation to significantly higher levels that would provoke central banks into aggressive tightening, the impact on global stock markets may be a positive.

The performance momentum could continue with the reopening of the nation’s capital reinvigorating economic growth, the strong upward trend in revisions to analysts’ earnings estimates for Japanese companies, lower relative valuations, and a historically bullish pre-election period.

A gradual slowing of stimulus heralds a potential drop for the world’s stock markets, but the evidence suggests a possibility for a positive outcome.

Supply chain issues are worsening again, reversing improvements seen earlier this summer.

China’s stock market pullback this year has been in line with the average annual drawdown; historically, this volatility has tended to produce double-digit annualized gains.

COVID-19 resurgences appear to be the primary driver of moves across many markets this year.

In the last few weeks, stock market leadership reversed back to lockdown-era defensives as the stock market made new all-time highs.

It is possible that good data could be interpreted as bad news for the U.S. stock market at least in the near-term as strong economic data, especially on jobs, could prompt the Fed to unwind earlier.

To get the facts, sometimes you need to look beneath the surface.

The recovery is now over; a new global economic expansion has begun.

While it’s very early to say the rise in inflation has passed, there are signs that the fastest part of the rebound in inflation might soon be over.

A boom in spending has stirred fears of economic overheating, which has coincided with a surge in commodity prices and a lift in traditional inflation metrics.

In recent months, two investment themes have been rewarding investors with outperformance: defense sector companies and those participating in share buybacks.

Hundreds of years of history shows us that investment bubbles have been a regularly occurring feature of the financial markets.

Policymakers in major economies have pointed to 2023 as the date the stimulus payback may begin.

This probably isn’t the start of a bear market, but it may feel like less a bull market compared with last year’s charge.

Accelerating growth is generally a good thing for stocks, evidenced by bond yields and stock prices typically rising and falling together.

The Year of the Ox looks bullish for China with economists and analysts forecasting GDP growth of 8.1% and earnings growth of 18% for the MSCI China Index. But February holds key developments for China that could impact this outlook, including stock delistings, trade, and COVID-19.

Hope is high that economic growth will accelerate as more people are vaccinated against COVID-19, but so far economic data has been lackluster. Meanwhile, bond investors are expecting inflation despite signs that the economic recovery’s momentum may be stalling. Why does everything seem so disconnected?

When investors talk about “the stock market” they are most often referring to an index that tracks stocks only in their home country. This “home bias” is evident when it comes to the make-up of investors’ stock portfolios. Investors around the world tend to hold mostly domestic stocks.

Joe Biden takes the Presidential oath of office this week in the U.S., marking the end of a long U.S. political contest; a year of political challenges is just getting started overseas.

U.S. stocks have continued to climb amid optimism about a vaccine-led economic recovery, but it’s a narrow path—buoyant investor sentiment could easily be deflated by bad news. Although global economic growth has struggled, an acceleration in vaccinations in major countries could support stronger growth in the second quarter.

After a powerful rally for stocks for much of 2020, let’s take a look at the biggest potential downside risks for investors in the year ahead. While none of these scenarios make our base case for 2021, a review of the top investment risks in greater depth may be prudent as we enter the New Year.

Encouraging news about COVID-19 vaccines has boosted hope for stronger economic growth, kicking off a rotation in stocks and equity sectors as investors look to a brighter future. However, near-term volatility is possible, as we’re not yet out of the coronavirus tunnel.

Key Points

• A COVID-19 vaccine could start being administered globally this week.

• The planned rollout is good news that has lifted the stock markets around the world. But the reality of the rollout faces risks that could extend the time frame for mass immunizations.

• We expect markets to be volatile in coming months while the threat of new lockdowns weighs against the hope of recovery, although we believe we may be on the verge of a period of international stock market outperformance.

Actual third-quarter earnings may be less important than what business leaders say about their expectations.

Stock market performance during the transition period between outgoing and incoming U.S. presidents tends to be more dependent on the economic cycle than the election results.