Despite a challenging 2022, marked by high inflation, supply chain issues, a war in Ukraine and a number of other factors, deVere Group chief executive Nigel Green said the coming year will be a positive one.
“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,” Mr Green said.
“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.”
He added that there are four major tailwinds that will excite global markets in 2023: inflation peaking, low valuations, digitalisation of business models, and the dollar.
Citing the speed and positivity with which markets reacted to the recent improved US inflation numbers, Mr Green said the cost of living will ease.
“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,” he said.
Due to recent market volatility, lowered valuations 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,” Mr Green noted.
He added that the digitalisation of business models continues to build momentum: “This will help increase efficiency, increase productivity, lower operational costs, improve customer experience, improve competitive advantage, and improve speed and outcomes of decision making.”
The deVere CEO also pointed to the strength of the dollar as investors, concerned about a global recession, sought 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,” Mr Green said.
He suggested that investors should focus on “recession-resistant” stocks, specifically looking to the food, energy and financial services sectors to perform well while inflation remains an issue.
“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,” Mr Green concluded.
“It’s been a rough ride in 2022 for the markets, but the indications are such that we expect more favourable conditions for the year ahead, and increasingly so, as we move through 2023.”
