2. The Federal Reserve remains in a tug-of-war with inflation, so it puts the word “pivot” on the shelf alongside the word “transitory.” The fed funds rate moves above the Personal Consumption Expenditures price index and real interest rates turn positive, a rare phenomenon relative to the last decade.

3. While the Fed is successful in dampening inflation, it over-stays its time in restrictive territory. Margins are squeezed in a mild recession.

4. Despite Fed tightening, the market reaches a bottom by mid-year and begins a recovery comparable to 2009.

5. Every significant correction in the market has in the past been accompanied by a financial “accident.” Cryptocurrencies had a major correction and that proved not to be a systemic event. This time, Modern Monetary Theory is fully discredited because deficits have proven to be inflationary.

Eoin Treacy's view

Here is a link to the full report. 

I liked these surprises for the coming year better when they were more risqué. I think the above four are close to consensus. The Fed has no reason to cut rates and will not do so until they have one. That implies significantly higher unemployment.

Here are some alternative surprises:

1.The biggest risk of a financial “accident” is in the private/alternative assets sector. This article talking about how US public pensions are run by union reps is a good example of how capital allocation is easily swayed by savvy salespeople.   https://news.bloomberglaw.com/employee-benefits/investing-novices-call-the-shots-for-4-trillion-at-us-pensions

2022 has provided plenty of minor liquidity events. Everything from crypto to UK pensions, to Korean perpetuals all point to global tightening. Eventually, unlisted assets will be forced to mark to market. When that happens, liquidity conditions will become solvency issues inside pensions. (Probability: 50%)

2. The US economy contracts enough to close the gap between available jobs and the size of the workforce. By unwinding the pandemic dalliance with Modern Monetary Theory a sustained recovery takes hold at the end of the year. (Probability 50%)

3.How about if the growing trend of Republican antipathy towards corporations extends to the ownership of residential property? Blackstone made a fortune from buying cheap homes during the 2008-12 housing crash. They have raised rents every year since. A change in the rules for landlords, of a given size, would destroy that business model and endanger the new funds raised to invest in this sector. (Probability 30%)

4.Another surprise would Venezuela normalizing relations with the USA and inviting foreign energy companies back in. That would be particularly bad news for energy prices. It would mean energy will not be the best-performing sector for three years in a row. (Probability 25%)   

I’m going to be meeting a representative from the Venezuelan embassy in Riyadh and I am very interested in what the tone of the conversation will be.

5. I don’t know if this is a 2023 event but sooner or later Henry Kissinger (99) and Wang Qishan (74) are going to die. That will remove one of the longest-running, trusted, and most influential lines of communication between China and the USA. It is no coincidence that they met in Singapore at the same time the G20 conference was going on in Bali in November, and less than a month later China abandoned COVID-zero. (Probability 40%)

6. Charlie Munger (99), Warren Buffett (92), Joe Biden (80) and several other influential people are at an age where health surprises are to be expected. That also implies the trend towards deprioritizing the needs and wants of baby boomers will continue.

7. Another surprise would be if the Dollar remains much stronger for longer. The USA faces significant threats to the status of the Dollar as the reserve currency. In order to protect it, they will have to do everything to ensure it is still an enduring source of value. That implies raising rates, reducing supply and finding new buyers for Treasuries along the way. (Probability (50%)

8.I would be truly surprised if Apple comes out with its anticipated VR/AR headset or glasses and it is such a success that it outperforms iPhone sales. (Probability 5%)

9.With Bed Bath and Beyond issuing a going concern warning today, 2023 could easily be the year when all of the meme stocks that should have gone bust in 2020 actually disappear. (Probability 70%)

10.Bitcoin bottoms in the first half of the year. (Probability: 75%)