Four key themes to shape investments in 2023

It’s 2023, Happy New Year! What’s in store for the year ahead for investors?

We expect there to be four principal investment themes investors will be focusing on and positioning for this year to grow their wealth.

Last year, global stock markets declined by as much as 18% on average, whilst bond markets – typically seen as a safe haven during periods of volatility – have fallen by an average 12%. Speaking of corrections, the crypto one in 2022 was especially harsh.

As I was quoted by MSN, International Investment, Tech Round and other media, the downward trajectory of financial markets has wiped tens of trillions of dollars in wealth over the last 12 months, which is why investors and savers are more focused than ever on the key themes set to mark the coming year.

So, what are these four main themes?

First, inflation will likely reach a peak in most major economies around the world. Then, as it begins to revert to target, the cost of living will fall, and central banks will ease up on rate hikes before winding down.

We’ve seen only recently how positively and indeed quickly markets reacted to the better-than-forecast inflation data coming out of the United States.

Although wage inflation is still an issue, it should ease as the year progresses.

Second is the reopening of China. After three years of strict Covid curbs, the world’s second-largest economy is reopening its doors. This could provide the strongest upside boost for global markets we’ve witnessed in recent times, and the rebound will likely be intense.

Third, I believe, is a weakening U.S. dollar. We forecast the strength of the greenback to peak by the middle of the year. A strong dollar has impacted developed and emerging markets across the globe, driving up inflation and hiking the cost of imported goods. As a result, it has led to some central banks tightening their own financial conditions. This will ease when the dollar’s dominance diminishes.

And fourth is rotation. As the cost of living lowers and global growth rallies this year, investors will be looking to increase their exposure to growth stocks – typically growing at a higher rate than the market average – such as tech stocks.

Therefore, a peak in inflation, the reopening of China, a weakening dollar and a rotation in the direction of growth stocks will be at the forefront of the investor mentality in 2023, we believe, following what has been a challenging 2022. We certainly predict more favourable conditions for the coming year.

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