NEWS & VIEWS
2022 was a turbulent year, with geopolitical tensions instigated by the war in Ukraine, economic instability leading to a global recession, and a UK government with a revolving door of prime ministers and officials. While there are hopes that 2023 will fare better, commentators are still cautious to predict a wholly positive outlook.
Political instability remains a key trend of 2023, as it was in 2022. Steen Jakobsen of Saxo Bank, has some ‘outrageous’ predictions including the resignation by French President Emmanuel Macron, in light of the growing strength of his opposition, and a possible review of Brexit. Though these are highly improbable, growing political turmoil, high unemployment and a “crushing recession” are more likely.
The war in Ukraine will also continue to have widespread impact, specifically on clean energy as the world seeks to wean itself off Russian gas and oil. However, news of a new coal mine in the UK (the first in 30 years) will add further fuel to the political instability within the country, as approval of the mine is seen as a step back from advancements in sustainability.
Regarding the economy, Mercer predict that inflation will peak in 2023, bringing some slight relief to investors as a result. The Confederation of British Industry however, forecast a contraction of the British economy by 0.4% with low levels of business investment. Goldman Sachs predict an even greater contraction of 1%, unavoidably throwing the UK into a recession, one that the Financial Times believes will be the worst of the G7 countries.
Looking to the rest of the world, Citi predict that US inflation will slow, yet global earnings per share will drop by 10%. China is forecasted by the International Monetary Fund (IMF) to struggle economically this year, as will “half of the European Union”.
Investment outlooks remain uncertain due to the risk of a global recession. While FT Adviser reports that a majority of advisers are not reducing risk in their portfolios, BNP Paribas note that global equities have meagre returns. Commentators from Rathbones, Hassium Asset Management and Elston Consulting, however, predict that bonds will be more attractive to investors this year, after faring poorly in 2022. Similarly, Sue Noffke of Schroders, sees the opportunities available for investors this year in both value and growth stocks.
The technology industry will continue to develop in 2023, according to analysts, with a particular focus on cryptocurrencies and automation. The former is forecast to see wider-spread adoption, as crypto becomes a staple in the payments markets. The rise of application programming interfaces (APIs) will also allow more firms to automate their processes – this digitisation is predicted to lead to a greater need and opportunity for client interaction, especially within wealth management. This, however, will require companies to adjust to new technologies in order to stay competitive in the market.
Environment, Social and Governance (ESG) factors will continue to take a front seat in 2023 with growth in sustainable investing, greater efforts to combat greenwashing, and a rise in ESG regulations. This is, however, contrasted with forecasts that the private sector will have to take the lead in advancing ESG as government funding falls short. Read more of the expert predictions on ESG in our ETHiX article here.
While 2022 was a difficult year in most areas, many of these challenges are predicted to subside slightly this year. 2023 is forecast to see politics, the economy and investment still struggle, but move towards a better outlook.