Albert Edwards: This Will Be The Big Surprise Of 2023

What goes up, must come down.

That's the fate of the current bout of runaway inflation according to SocGen's residentbear, Albert Edwards, who writing what will likely be his final strategy note previews what he thinks will be the big surprise of 2023, which is..."a return to deflation fears as headline CPI inflation drops close to, or likely below zero. Investors are already anticipating recession and have an unusually strong preference for bonds."

But how low will yields fall in 2023 (and how high will risk assets melt up) as headline inflation evaporates? According to Edwards, what comes next year will merely be the eye of the inflationary hurricane, as "any decline will be purely a cyclical phenomenon rather than a full-blown return to the Ice Age theme." Indeed, according to the SocGen strategist, "investors have not yet discounted a second secular wave of inflation as we eventually exit this unfolding recession – ie the Great Melt."