No one knows what 2023 will bring for Wall Street.

Still, recent history shows what we’ll want to keep an eye on over the next 12 months.

war and geopolitical tensions

The war in Ukraine and rising tensions between China and Western democracies and free nations in Asia will continue to bring defense spending to the front of the line when it comes to government budgets.

This phenomenon is likely to continue long after the war with Ukraine ends. Governments are less and less willing to trust potential adversaries. Instead they want enough power to drive out their enemies.

That means companies like Raytheon (RTX) and its competitors should rake in some nice coins and the expectation of even more to come should continue to drive shares higher.

China falling down?

China already has credibility problems with Western businesses that have stolen intellectual property. Corporations that once embraced the communist country are now quietly but swiftly relocating their factories to safer countries.

On top of that, there is a failed COVID-zero policy that has done nothing to help China and everything to hurt it.

And of course China is suffering the side effects of a property boom and bust as well as a population decline.

With all of those things coming together, it wouldn’t be surprising to see China’s economy collapse in on itself. In turn, this could prompt the country’s leader, Xi Jing Ping, to invade Taiwan to distract attention from its creaking economy. This has been a well used tactic by dictators for centuries.

Either way – a collapse of China’s economy or an invasion of Taiwan – would hurt investors in emerging markets.

recession clock

The US and Europe are likely to remain on recession watch till 2023. Europe is still grappling with energy problems in general, and Germany’s strange energy policy in particular, which has meant favoring clean fuels, such as nuclear power, over coal, a toxic mess if there ever was one.

Europe may be in recession, but many experts say it is likely to be mild.

In America the voices seemed confused. The data is showing nothing imminent to drag the economy’s growth down into an economic war and send unemployment back into the double digits. It could happen, but it doesn’t seem likely yet.

As always, things can change quickly, so stay tuned and watch the data closely.

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