The year ahead promises to be much more positive for markets, after the turbulence of 2022.
The bullish prediction for 2023 by Nigel Green, chief executive of deVere Group, comes as investors look ahead after a rough year for markets triggered by headwinds, which included Russia’s war in Ukraine, broad inflationary pressures, a global economic slowdown, strong dollar, and ongoing supply chain issues, amongst other factors.
After an astonishing bull run of 13 years, financial markets went into bear territory in 2022 amid increasing global volatility, creating a pretty grim environment.
However, the landscape is already looking brighter for the year ahead. We expect some key market, macro and policy shifts that will provide a significantly more positive outlook for investors in 2023.
There are four major tailwinds that will excite the global financial markets.
First, inflation is likely to peak in most major economies. As inflation begins a return to target, the cost of living will drop for consumers and central banks will ease their feet off the economic brakes, going easier on interest rate hikes before winding down.
We saw how positively - and how quickly – markets reacted to the better-than-expected U.S. inflation print last week.
Second, the low valuations. Market volatility has lowered valuations of some high-quality equities, which can create better long-term investment opportunities and generate higher income for investors.
In many cases, they will be currently viewing this backdrop as a buying opportunity to top-up their portfolios.
Third, the digitalization of business models continues apace. The momentum is continuing to build. This will help increase efficiency, increase productivity, lower operational costs, improve customer experience, improve competitive advantage, and improve speed and outcomes of decision making.
And fourth, the dollar. Worried about a global recession, investors have piled into the dollar looking for a safe haven. This has negatively impacted both developed and emerging markets globally, fuelling inflation and raising the cost of imported goods. It has also added to the need for some central banks around the world to tighten their own financial conditions. But we expect the dollar strength to peak in mid-2023.
Inflation will still be an issue for a while to come. You should take a look at stocks that are likely to be recession-resistant. For example, people will still need food, energy and financial services during a downturn. These sectors should do well.
But it is likely that investors will be seeking to increase exposure to growth stocks towards the end of 2023 as cost of living eases and global growth picks up pace.
In conclusion, It’s been a rough ride in 2022 for the markets, but the indications are such that we expect more favorable conditions for the year ahead, and increasingly so, as we move through 2023.
