“I see 2023 as a transition year. Last year, we saw the world suffer from the shock of hyperinflation, completely shutting down China and its economy as well, and that created a supply chain crisis all over the world. Europe went to war and it still is. Continuing with Lombard-Odier chief economist Dr. Sami Char told Globes, energy prices jumped after that. “All of this happened after the Covid crisis, which actually reinforced the environment that raised interest rates around the world.”
Schar, who serves on the Lombard-Odier Investments Committee, heads a team at the Swiss bank that analyzes and applies macroeconomic issues including growth, economic trends and measures taken by the world’s central banks. Globes not only tells how he sees the global macroeconomic situation and what can hinder the global struggle against inflation, but also discusses the political turmoil in Israel, which does not concern him. He claims that this is not a unique situation but a global phenomenon.
I know very well the political situation in Israel.
Char is familiar with the Israeli market because Lombard-Odier works closely with Israeli clients and seeks to expand its operations in Israel.
“I understand the political situation in Israel and know it very well,” he says, referring to the prevailing political crisis in the country. “First of all, it is important for me to give a warning and point out that politics is currently chaotic everywhere in the world, not just in Israel. Society is divided and polarized everywhere, elections in the United States will not be easy, there are protests in France, and the coalition in Germany is complicated, and Britain is also in a difficult situation.
“When this is the situation, I focus on what companies do in the field of macroeconomics, and Israeli companies are successful regardless of political background. And technologically in terms of achievements at the highest level, Israel is in a good position. It is a center and incubator for advanced technology, and the situation The economy in Israel is also excellent, and inflation is still high, but I’m not worried about this, the situation will improve, so I don’t expect Israel to suffer from inflation for a long time.”
Another issue of concern to foreign investors in this context is the performance of the shekel. Since the beginning of 2023, with the struggle over judicial reform in the background, the shekel has performed poorly and its value has fallen by about 4% against the US dollar. However, Logo believes that this is a temporary situation.
“I basically see the depreciation of the shekel as a matter of real interest rates combined with inflation,” he says. “When inflation stops and interest rates stop rising, the shekel will recover.”
Chaar also expressed optimism about the outlook for the global economy.
“China has opened up completely, supply chains are working again, commodity prices have come down a lot and energy prices have also returned to reasonable levels compared to the crisis period surrounding the war between Ukraine and Russia,” he says. “I imagine the struggle of the global economy as a marathon – you have to run 42 kilometers and get to the finish line, which is about 3% inflation. We’re in the middle of the race, we’ve come a long way especially when it comes to energy and supply prices, but the economy is still hot.”
In what sense is it hot?
“Mainly in the area of wages, which are still very high. In general, the labor market is particularly hot in the United States. Interest rate increases are supposed to cool the labor market, and in reality it is not as active as it was a year ago, it is down The number of jobs available 200-300 000 per month 500-600k.In the wage increase the peak was an annual rise of 8%-9% and now we see a range of 4%-5%.This is also affected by the interest rate hikes by central banks in the world “.
“So if we go back to the marathon analogy, we still have a third of the race left to get to the finish line in economic terms. We need the labor market to continue to cool down — in the US and elsewhere — and we’ll see fewer job vacancies and lower wage levels. And if it continues at the current rate, we’ll reach to a good place by the end of 2023.”
Do you think we have reached the limit in terms of interest rates?
If 2022 was the year of raising interest rates, when central banks were particularly aggressive and took sharp measures that surprised the markets, then we expect that at the end of the year we will reach a halt in the hikes, or at the beginning of 2024 at the latest. In the US, I don’t estimate that the Fed will raise interest rates above their current level, perhaps with another 0.25% increase, which would raise the upper limit to 5.5%. In Europe, we will see a maximum interest rate of 3.75%. The need at the present time is to continue the pressure, not to increase it, and this is a big strategic difference. Now we have to let the interest rate do its magic.”
Published by Globes, Israel business news – en.globes.co.il – on June 29, 2023.
© Copyright Globes Publisher Itonut (1983) Ltd., 2023.