Wall Street, 2023 is a year to forget.
Global investment banks turned almost unanimously optimistic on the market around this time last year, only to be confounded by a 14% drop in the MSCI China Index.
Now, as policymakers ramp up efforts to arrest a housing slump and extend funding support for the broader economy, hopes are building again that 2024 will be better. But it's a case of once bitten, twice shy. This time around, expectations are much more modest.
«It's like we've stood still in time for 12 months.
The thing that changed, though, is people's perceptions. They have gone from very optimistic to very pessimistic,» said Steve Wreford, a portfolio manager at Lazard Asset Management. «Being optimistic a year ago was the wrong thing to do.
And I wonder if maybe now being pessimistic is also the wrong thing to do.» What a difference a year can make. Back in late 2022, Goldman Sachs Group, JPMorgan Chase. and Morgan Stanley were predicting at least 10% annual gains for the MSCI gauge as Beijing dismantled stringent Covid controls.
A Bank of America survey showed funds were rushing to boost exposure to Chinese shares in anticipation of a robust economic reopening.
Reality bit hard. While US, Japanese and Indian stocks rallied this year, those in China have languished to make it the world's worst-performing major market. Equities onshore are poised to see a record fifth straight month of foreign outflows in December.
In hindsight, Wall Street's misplaced optimism likely resulted from an under-appreciation of the magnitude of headwinds ranging from weak consumption to prolonged housing woes as well as geopolitical tensions, and an overestimation of authorities' willingness to ramp up fiscal spending in an indebted