2022 will rank as one of the most turbulent years for markets since the Global Financial Crisis of 2008 with the main drivers – February 24th and Putin’s invasion of Ukraine coming at a time when the world was seeking to emerge from the global pandemic, bringing significant human, economic and financial dislocation across the globe. We saw soaring energy and food prices, record-breaking inflation not seen since the 80’s, multiple stock sell-offs, with the technology sector leading declines, significant and aggressive rate tightening from central banks, a bear market and, in the UK, the most extraordinary events following the Truss/Kwarteng mini-budget and the implosion of UK financial markets and forced intervention of the Bank of England.
Without question, inflation dominated the economic landscape in 2022, with both the ECB and the Fed at their December meetings reinforcing price stability and a continued hawkish stance, raising interest rates by another 50bp to further combat inflation. These increases were smaller than the earlier hikes of 2022, which could be a sign that inflation is cooling down and indeed has peaked. For now, inflation is still stubbornly high, and it could be some time before it normalises. However, most metrics are pointing to a sharp fall in inflationary pressures over the coming months not just in the US but around the world, which should help support asset prices.
For 2023, we believe peak inflation and peak policy will provide us with an investment backdrop ripe with opportunity, and we feel that asset prices will fare better over the course of the year as markets have already priced in the lagging impact of rate rises.
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Seaspray FINANCIAL 2023 OUTLOOK (FINAL WITH PODCAST)
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