There’s no doubt that 2022 will be viewed as one of the most challenging years for investors. A war in Ukraine (which very few predicted) and rising inflation led to the majority of Central Banks responding with much more restrictive monetary policy. Charlie Buxton, our Head of Investment Management, reviews the last few months of 2022, and looks ahead to what 2023 has to offer.
2022 is likely a year which most investors, and investment managers, are happy to move on from. Significant pressures took their toll on markets, and the themes of inflation, rising interest rises and energy price hikes played out across the globe.
Yet the last few months of 2022 offered some glimmers of hope, with expectations of interest rate rises easing, and global equities delivering some strong returns.
Inflation showed potential signs of peaking, although there’s likely to be some way to go before Central Banks feel more assured of their next steps. In the UK the combination of the new Prime Minister, Rishi Sunak, and Chancellor, Jeremy Hunt, and the perception that the Government was back in steadier hands brought with it the return of fiscal prudence, and hopefully some stability. The last few weeks of the year also saw a dramatic turnaround in China’s approach to Covid, and although there may have been a bumpy start to lockdown easing, the sense that normality is returning to a country of 1.4 billion people should bring with it increased demand and less volatile supply chains.
So, what’s ahead for 2023?
It certainly feels like a sense of optimism is returning to world markets. Whilst we anticipate more volatility, particularly as Q4 earnings start to show the potential impact of last year’s interest rate rises (given they typically lag 12-24 months after the event) there’s room for positivity. The marked sell-off across both equities and bonds has left certain regions looking attractive, particularly in Asia, whilst bond yields also now look a lot more appealing than they have done over the last 10 years. Let’s not forget too that, historically, markets have typically bounced back after negative years, and we remain optimistic that there are opportunities for that to happen again.
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