2023 is likely to be dominated by recessionary fear, higher and longer interest rates, US Dollar strength, stagflation and increasing global geopolitical uncertainty. Energy is entering a secular bull market driven by climate change, while cryptocurrency is still reeling from the growing mistrust of crypto exchanges and trading, triggering the need for guardrails from global regulators.

2022 GAVE INVESTORS JUST ABOUT ALL THEY COULD TAKE

• Bear markets across the globe wiped out $22 trillion in wealth
• 40-year high inflation levels
• Hawkish central banks
• Russia’s invasion of Ukraine
• Tense US elections
• The collapse of risk assets

As we look ahead into investing in 2023, some of the dynamics may change, others will be amplified, and new ones will emerge.

The new “new normal” looks very different from the past two, or even twenty years. Here are some of the major themes distilled from last year which are likely to keep dominating the investor landscape in 2023:

Recessionary Fear

Recessionary fear is a ubiquitous theme almost everywhere you look, but recent global events and unrest have further amplified these fears across the world.  Will it be Value or Growth Stocks next?  Global GDP is down, and most countries have revised economic growth downwards with the ongoing struggle between inflation and rising interest rates.

Developing nations who rely on exports are usually hard hit, exacerbated by the fact that the depth and duration of the recession is unknown.  In the US, the silver lining is that most companies are better capitalized to face this burden than they were in the 2000 & 2008 contractions.

Interest Rates: Higher for Longer

More hikes are coming in 2023, but they will probably not be as aggressive as in 2022 due to dampening inflation. However, the cycle will be slow turning back to rate cuts and growth.

US Dollar Strength

The US Dollar will remain resilient – especially if rate hikes continue. It certainly affects companies who charge in USD as exporters. Cash is finally offering some return!

Stagflation

Due to the current threat of high prices of goods, coupled with slowing or stagnant growth, stagflation will be a big worry to investors.

More Global Geopolitical Uncertainty

Uncertainties remain due to the conflicts between Ukraine vs Russia, North vs South Korea, China vs Taiwan, India vs Pakistan, and inevitably between the global powerhouses via their support bases. Economically, these conflicts cause major supply contractions, as can be seen in the Ukraine conflict with food and energy.

Energy – A Secular Bull Market with Climate Change

The transition to clean energy could take longer than anticipated as evidenced by the current northern hemisphere winter energy crisis. Efforts to stop Russian oil exports could well fail and the price of crude oil could rise exponentially.  We are seeing increased extreme weather worldwide because of global climate change.

Will the Crypto Winter Continue?

2022 was a deep freeze of discontent towards crypto, and the intention is that global regulators need to put guardrails on this investment class. The implosion of crypto exchanges and trading collapse meant investor trust has been hugely shaken in digital assets. Major custody institutions with proven long-term track records could help dispel mistrust.