Bad to Better

Trends never move in straight lines. This is certainly observable in markets. Styles experience the same phenomenon. Perhaps the kernel of a trend is revealed at a fashion show, but it takes the greater population a little time to embrace the new look. A similar pattern is emerging for the globe as it tries trending back to something more normal from the depths of the pandemic.

This was a big week for the world. Here in America, we just celebrated Thanksgiving Day. Raise your hand if you already know what you’re eating for lunch today. Travel in the U.S. seems to be normalizing. While not quite back to the records set in 2019, Los Angeles International Airport is expected to record 20,000 more travelers a day from November 18 through the 27th, peaking with 215,000 passengers this Sunday.  Simultaneously, the first of 64 games have been played in this year’s World Cup match in Qatar. Fans from Ecuador chanted in favor of beer during their opening match against the host team. We’ll know who wins it all on December 18th. Things are almost starting to feel normal.

Unfortunately, the echoes of Covid-19 are beginning to reverberate once again. Three and a half million residents in Beijing’s most populous district were told to stay home. The region is once again experiencing a surge of cases, and officials are trying to keep it from spreading by shutting down the area. Guangzhou, a more southern city, was also locked down. This came after policy makers took initial steps earlier this month to ease zero-covid measures. These are large cities, known for their political and economic importance. Here, things are starting to feel like last year’s normal. 

A large proportion of global output faces challenges. America and China are the world’s two largest economies. They have strong ties as global enterprises from the two nations trade and partner together. America’s economy (the largest) has struggled to improve most of this year and seems to be headed toward a recession. This one could be different from the most recent few since the Federal Reserve is currently dealing with inflation and may be less willing to come to the rescue as a result. Now the second-largest economy is taking measures which will likely reduce its economic growth. Add to that a European Union which has a war just beyond its border creating an energy crisis for its 27 countries and you end up with a $17 trillion economy saddled with its own uncertainty. This year has just over a month left, but many difficulties will be unresolved as we start 2023.

Our world does not have the most optimal setup to start the new year, but circumstances will change. As the year unfolds, a better understanding of the pandemic’s current phase will be emerge. The Fed’s actions to calm inflation should also start to show signs of working as well. The world doesn’t have to go from bad to good; it just has to get marginally better, like when the earliest stages of spring begin to emerge, and plants react. A new trend is on the horizon. We just aren’t there yet.