To navigate the markets in 2022 agility was required: even in 2023 the story does not change.
Overall the ongoing paradigm shifts will require investors to search for a balance between new opportunities and risks related to the transition process of the global economy. That’s what the experts claim Private Banking Union, indicating their predictions for the year to come.
Economic and market prospects for 2023
“In summary, in 2023 we expect to continue to build on active and dynamic risk management which will help us deliver on our commitment to preserve and grow our clients’ assets.” can be read in the analysis.
The growth phase of the cycle came to an abrupt halt due to the restrictive monetary policies adopted to combat persistent inflation and the energy crisis gripping the economies together with the exacerbation of geopolitical risks induced by the war between Russia and Ukraine.
One is expected in 2023 weak growth of the global economy between 2 and 2.5% after 3% in 2022 with developed economies on the verge of recession, while recovery in Asia is expected to continue and China is likely to overcome the hurdles that emerged in 2022.
In Europe, price increases and the possible gas rationing they will weigh on consumption and energy saving measures will have a negative impact on manufacturing production.
In the United States it is expected a sharp contraction in consumption and in the real estate sector induced by the rise in interest rates, while the manufacturing industry will have to face the continuous increase in costs and could be affected by the modest growth of global trade.
Going into detail, UBP experts, looking at forex, point out that, “after the 2022 exploit, several factors seem to converge in the first quarter of 2023 to trigger a depreciation of the US dollar against most currencies.
“The weakening will come in stages, starting with a decline against safe-haven currencies, which generally indicates a slowdown in global growth. We believe that by the first quarter of 2023 the upward trend of the dollar will end and that trading will increasingly take into account the risks in two directions: in fact, the achievement of the spike in Fed rates, falling inflation, excessive valuations and the increase in the current account deficit”.
Per with regard to precious metalsexperts predict “that the gold and the silver they will make progress in 2023 supported by a moderate weakness of the dollar, by the possible achievement of the peak of interest rates and by the increase in consumption”.
“However, both metals’ upside potential should be limited as nominal rates early in the curve remain high. The prospects for platinum are contrasting, as long-term structural supports give way to short-term cyclical challenges.”
“Palladium – it still reads – will presumably experience progressive structural decline, given the transition to battery electric vehicles and significant substitution effects.”
As far as the bond markets are concerned, “these will close in 2022 with the heaviest losses of the last 50 yearsUS bonds have canceled out the accumulated total return since 2017 and reversed the downward trend in yields that began with the outbreak of the 2008 global financial crisis.
Concerning shares, UBP reminds that “its valley in 1900 episodes of high inflation have put investors to the test. Lessons learned from past events showed that investment strategies aimed at exploiting cyclical peaks in inflation, aimed at reallocating spending within the economy, and income-oriented supported total returns. Faced with inflation in Western economies that has reached levels untouched by a generation, investors can look to the past to integrate various investment strategies that allow them to cope with the new regime of high prices. These strategies involve consideration high but falling inflation as a tactical opportunity, focusing on earnings resulting from the forced reallocation of spending and orienting towards dividends and income as key drivers of total returns”.
Focus then on the energy transition and on the fact that coal and oil today “they are experiencing a revival, in favor of exporting countries and companies and to the detriment of energy consumers”.
“From a strategic point of view, the experts continue, this is leading to important political responses to guide the energy transition, even in the United States, which has always been the rear light on renewables. In the short term energy is scarce in the world and exposure to energy supplies is important in structural terms”.
Ma the current energy crisis has also been aggravated by climate change they say for which “While energy and infrastructure may be the most direct and overt beneficiaries of the energy shock resulting from deglobalization, increased spending to support fertilizer producers and seed technology providers will be key to restoring a sustainable global food balance and should deliver investment opportunity in the next future”.
Finally, the analysts conclude, “Deglobalization risks, whether economic or geopolitical, pose a significant threat to the systems that have driven the world economy and global investors since the 1990s. With these risks continuing to emerge on the horizon, customers will need to adopt proactive and dynamic risk management approaches in 2023”.