Holiday Greetings & Merry Christmas
2022 had a few surprises in store for us, and economists had a busy year. As the year draws to a close, it’s time to take a look back at the past 12 months, and a bit what’s in store for 2023.
Global economic activity in 2022 experienced a broad-based and sharper-than-expected slowdown, with inflation highest than seen in several decades.
The cost-of-living crisis, tightening financial conditions in most regions, Russia’s invasion of Ukraine, and the lingering COVID-19 pandemic all weighed heavily on the outlook.
Global growth is forecast to slow from 6.0 percent in 2021 to 3.2 percent in 2022 and 2.7 percent in 2023. This is the weakest growth profile since 2001 except for the global financial crisis and the acute phase of the COVID-19 pandemic.
At the same time global inflation is forecast to rise from 4.7 percent in 2021 to 8.8 percent in 2022 but to decline to 6.5 percent in 2023 and to 4.1 percent by 2024.
Monetary policy should stay the course to restore price stability, and fiscal policy should aim to alleviate the cost-of-living pressures while maintaining a sufficiently tight stance aligned with monetary policy.
With all these factors influencing global markets, it was no wonder that 2022 saw major down drafts in both global equity AND bond markets.
It’s been 50 years since we’ve seen similar conditions in global markets.
By this time last year we had already adjusted your portfolios for a downturn in capital markets.
We stayed the course for 2022 using a barbell approach, utilizing credit and high grade investment bonds, energy, precious metals and real estate, and equities related to both of those markets.
If any good news for capital markets in 2023, its likely bonds, particularly those of major Western economies, which will be issued north of 3% and higher. The bear market in bonds appears to be over, at least for the moment
Analysts are still decided on whether central bankers can guide their economy’s to soft landings in 2023.
Expect equity markets to be soft in the 1st half of the year.
However should the efforts of central bankers pay off, expect the 2nd half of 2023 an ideal time to pick up great deals.
I’ll be in touch with you in early January to book annual reviews.
At this time I want to wish all of you and your families, a Merry Christmas, a great holiday season and a Happy New Year. Look forward to seeing you in 2023!