The first work day of the new year began with a deluge of notes and commentary from analysts returning to desks after vacations. That can be a lengthy process. Everyone wasn’t back on Tuesday, I can assure you of that.

There’s much to discuss. I endeavored to cover all of it during the break. I offered the usual preview of upcoming key data in the world’s largest economy, documented the drama unfolding in the world’s second-largest, contextualized key US labor market reports via the Fed’s jobs dilemma, discussed the outlook for fiscal policy in a divided Washington, touched on the tenuous prospects for global growth, lamented Vladimir Putin’s ongoing descent into delirium and offered a reminder that the debt-ceiling debate is, for the most part, couched in extremely misleading language.

Suffice to say that if you’re a regular, dedicated reader, you’re up to speed. But, as the new year kicks into gear, I think it’s useful (from an orientational perspective) to offer a quick survey of excerpts from analyst color. Much like “Existential Questions For 2023,” the topics vary.

As the war in Ukraine enters its second year, a key question for market participants is whether Russia’s disruptive power is diminishing or whether it still has the capacity to cause significant pain for Western consumers by curtailing energy supplies. Despite Russian causalities topping 70,000 and a projected 3.4% GDP contraction in 2023, President Putin shows no signs of abandoning his maximalist goals. At the same time, there are questions about what remaining cards Washington is holding if there is another surge in energy prices due to the war and/or a full China reopening. Having already drawn down over 200 million barrels from the Strategic Petroleum Reserve, it would appear that the White House would fall back on the long standing strategy of seeking additional barrels from Saudi Arabia and the few remaining Gulf producers that hold spare capacity. However, if we have learned anything from this year, the interests of Washington and the OPEC nations are not always aligned and a failure to connect can trigger recriminations. — Helima Croft, RBC

In the next few years, the policy environment seems sure to become more equivocal. With inflation showing signs of falling, and many market and economic actors anticipating a slowdown in the economy, the Fed’s dual mandate will test the Committee. We are in the more sanguine camp on the economy — we believe that any slowdown, or even recession, will be mild and short-lived, and are more concerned about inflation remaining elevated for most of the year. This view will be challenged, however. Major inflation gauges finished 2022 somewhat lower, and optimism that inflation is going to return to target is growing, even as fears about a slowing economy continue to mount. Consensus forecasts see inflation (core PCE) slowing to 3% by the end of 2023, while GDP is forecast to be negative in Q3 and Q4. That scenario would argue for a more dovish policy setting. Our contention is that the consensus has overdone its views on both inflation and growth, and that the former will be stubborn — despite an initial retrenchment — while the latter will be better than expected. — John Velis, BNY Mellon

We expect the ‘bad news is good’ mantra… will define trading in US rates and risk assets for the bulk of January as the Fed’s next rate hike approaches. Payrolls is this week’s data highlight and the consensus anticipates a solid but slowing pace of growth at +200k — such an eventuality would represent the lowest print since NFP dropped -115k in December 2020. That said, a +200k gain in payrolls is a solid reading in a typical (or pre-pandemic) environment and as such we’d struggle to envision a consensus print deterring the FOMC from continuing on with its objective of reaching terminal in the coming months. At present, the fed funds futures market is pricing in 33bps for February 1 — 100% on 25bps with a ~32% probability the Fed delivers another half-point hike. Friday’s employment report will be instrumental in further refining expectations for the magnitude of Powell’s next move and thereby the prospects for achieving the 5%-5.25% terminal signaled via the recent SEP update. Said differently, the potential to fall short of target increases in the event the FOMC downshifts to a pace of 25bps in February. — Ian Lyngen and Ben Jeffery, BMO

As central banks remain focused on the upside risks of inflation persistence, that also increases the risks of policy errors. It’s hard to argue with the reasoning of many central bankers that they now stand to lose more if entrenched inflation leads to a loss of credibility than they might lose if they err too much on the inflation-fighting side. To repeat one of my colleague’s quips last year, “Nobody ever got fired for hiking rates when inflation is at 7%.” That thinking, however, does increase the risks of an accident. After all, it is hard — if not impossible — to determine when a central bank has done enough to avoid the risk that inflation expectations become de-anchored. — Bas van Geffen, Rabobank

With 2022’s poor performance behind us, investors are now staring down the barrel of a profit recession, but so far, most of the downgrades have come from removing excessively optimistic forecasts extrapolated from 2020/21 and not from any imminent economic slowdown. Although equity prices often fall in tandem with earnings expectations, a bursting bubble will often see equity markets decline well in excess of the decline in earnings expectations. So, the sharp 2022 losses do not necessarily mean the market is fully anticipating a profit decline, rather they were simply removing the excesses of the previous years. — Andrew Lapthorne, SocGen