Economic Insights for December 2022

The following are some economic insights for the month of December.  As of now, the Federal Reserve has shifted its priorities in light of a slowing global economy.  They have moved from expediting rate hikes to setting the right peak rate target.  We could be looking at a hike of 50 basis points in December, followed by a projected two consecutive 25 basis points in Q1 2023. We are looking at a possible recession in the US economy, which will lead to a growth in unemployment.  This feeds the possibility of the Federal Reserve cutting the rates in the second half of 2023. 

Fortunately, global supply chain bottlenecks have continued to ease in the last quarter.  This partly explains the weaker-than-expected US inflation for October.  Leading indicators such as the rise in housing prices and the consumer price index suggest that the momentum may turn.  On the other hand, the labour market indicators have remained steady.  This may delay disinflationary pressure for the early part of next year. 

The People’s Bank of China announced a 25-basis-point cut to the required reserve ratio, the reserve repurchase option rate.  They have also rolled out further measures to secure the financing for property developers to alleviate a feared cascading default.  That would weaken the CCP’s grip on power and fuel instability.   The ongoing monetary easing continues to remain ineffective in turning around the growth slowdown amid a subdued credit demand.  Even though China has signalled that they are easing lockdown measures, especially after recent unrest, I think we should remain sceptical until it happens. 

One of the largest drivers determining the range of portfolio outcomes is asset allocation decisions amid volatile markets.  Aggressive policy tightening has tempered the high inflationary environment, but now, we are on the precipice of a global recession.  As such, it would be preferable to stay underweight on equities, have greater liquidity, and gradually pivot towards allocating more to fixed income, with an extended investment horizon.  It would be better to prefer rated sovereign bonds over credit. 

In the meantime, I advise that investors remain underweight on equities, since there is a tactical downside risk.  In fact, further equity downside ahead will likely be driven by falling corporate earnings expectations, despite valuation stabilising because the Federal Reserve is raising rates. This is not necessarily a bad thing.  This is preferable to the shock of a major market correction. 

For equities, the choice is, of course, Asia excluding Japan.  The US is slowing down alarmingly.  The EU is still wrestling with a negative rate environment, while funds are pouring into East and Southeast Asia. 

Credit spreads are benign because of the fear of recession, and there is merit in that.  Lower-quality credit, especially from the US, is most vulnerable to weakening demand.  Borrowing costs are rising and will continue to rise.  We must consider the possibility that there will be some major defaults in some markets.  The short-end rates of the US Treasury curve continue to push higher.  Long-end rates, in contrast, have retreated to lower levels.  This has resulted in a more inverted yield curve.  This is an ideal environment to build a rated bond position.

The Elite Speaker Incubator: Why Twenty-Four Seats Beat Two Hundred

On the 26^th November 2022, AIA Toastmasters and Tampines Changkat Toastmasters ran the Elite Speaker Incubator at AIA Tampines, on behalf of Division G.  The premise was simple.  Take Toastmasters serious about the International Speech Contest, and give them the one thing most speech workshops refuse to give anyone: genuine depth. 

Toastmasters International’s World Championship of Public Speaking draws over 30,000 participants from more than 100 countries in a typical year.  That field narrows through club, Area, Division, and District rounds down to a semifinal group, and finally to a mere eight or ten finalists standing on the world stage.  The odds of reaching that stage are worse than most people’s odds of getting into a top university, and yet the industry response to this filtering process is, overwhelmingly, a two-hour generic workshop covering tips for confident speaking.

The Elite Speaker Incubator refused to play that game.  It was one session, intensive, and unapologetically narrow in focus.  It drilled into what actually separates a good speech from a memorable one, then moved participants into breakout groups with facilitators for direct, individual scrutiny.  Intake was capped at the first 24 people to sign up.  No padding the room for optics, no diluting the ratio of coaching to participant.  Twenty-four people got real attention.  Two hundred people would have got a lecture.

The credentials in the room justified the exclusivity.  Lead trainer Kin Ng, DTM, is a two-time finalist at the World Championship of Public Speaking, which places him among a handful of people worldwide who have twice survived a filtering process that eliminates over 99.9% of the field before the final round.  That is someone who has been tested at the level the programme’s participants were actually aiming for.

The full slate of appointment holders is worth recording for anyone tracking Division G’s bench strength: Terence Nunis, DTM, served as Organising Chair and doubled as a facilitator; facilitators Eric Tan, DTM, and Hyder Taufik, ran breakout sessions alongside him; Amos Yio, and Johnny Bao managed logistics; Zhuo Shu Zhen, DTM, and Cindy Gan, ran refreshments; Rominia Leonard Sarte, PI2, was photographer; and Regine Sim, handled publicity.

That is a lot of experienced Toastmasters organising a single afternoon for 24 people.  It should be.  Getting past the club round of a contest with 30,000 entrants is not achieved by attending a workshop that treats speech craft as a checklist.  It is achieved by exactly this: small numbers, serious trainers, and a refusal to confuse volume with value.

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Terence Nunis, DTM | Division Advisor, District 80 Division M | Club Advisor, AIA Toastmasters | Past President & Founder, Awesome Toastmasters