Happy Lunar New Year! Happy Year of the Water Rabbit! The rabbit in Chinese culture is a symbol of youth, energy, peace and harmony.
The good news is that rabbit years have been very good for the stock market. Since 1926, the rabbit years have produced an average return of 15.5% with only one year in the red, and it was just barely down at -0.4% in 1939.
Chinese astrologers are expecting a less volatile year than 2022, but they aren't expecting it to be easy either.
“There’s not too much chance to make a handsome return on the stock market in the first half,” Tong Pik-ha said. “Investors should make use of the opportunities to buy on market dips.”
China re-opening in a big way
One country to watch in 2023 is China, the only large economy that is expected to see growth accelerate. Why the divergence? China has finally pivoted from its zero COVID policy after three years of rolling lockdowns.
In the US, most people stayed cautious for the first year of the pandemic before returning to more normal life which brought about new terms like revenge travel. Just imagine what the Chinese re-opening will look like from a spending perspective as they emerge from three years of isolation.
Thanks to the re-opening, Goldman Sachs raised its China GDP growth forecast from 4.5% to 5.2% and is forecasting 2Q23 annualized growth of 13% (this is reminiscent of the US hypergrowth in 2Q21 (where GameStop and AMC dominated headlines). The growth impulse is expected from consumption demand where Chinese households accumulated roughly Rmb2tn of excess savings in the past year.
It will be an interesting Year of the Rabbit for all financial markets. May it bring you good health and prosperity in the year ahead.
Feature image from Unsplash
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