What to look out for in 2023

As an economist by training, I take a huge interest in world affairs. The start of a new year gives us a great opportunity to not only reflect on what has been but also to reset and look forward.

Of course, looking forward does not mean predicting. It’s about being as aware and informed of what’s happening as possible – not being caught off guard where you can help it and going into the new year prepared. There are so many things we cannot influence as they happen, but personally I seek to understand and professionally I seek to remove surprises.

The world has had yet another tough year and 2023 will not be without its challenges across the world, but it also brings great possibility. Much will depend on the Russia–Ukraine war. Russia is likely to want to string out the war, causing a greater energy crisis and discord across Europe, and will hope to see the Republicans take stronghold in the US, reducing western support for Ukraine.

China has dominated economic conversations and predictions for a long time, but with India set to overtake China’s population and with a slowing Chinese economy, has China now peaked?

They have held ambitions to overtake the US economy in size, but this looks very unlikely. China may refocus, and many believe this increases the likelihood that it opens attacks on Taiwan to seize what they want.

Questions to be answered in 2023

• How long will the Russia – Ukraine war continue and what will the ongoing impact be?
• Are there opportunities to be had as global economies and companies address the difficult mix of high costs and low demand?
• What key trends should investors keep an eye on over the coming year?

What will change from 2022 to 2023?

As I have said, I don’t like to predict, but I will afford myself one: the hot tub purchasing craze is on the decline. Covid lockdowns saw many of us spend money on our homes, with hot tubs one obsession which continued into the summer after restrictions were lifted. However, with soaring energy prices demand has plummeted. I predict that usage for the majority of those with hot tubs will also decline.

Positives to look out for?

Preparing for challenges is important in financial planning, which is why economic outlooks tend to always seem a little gloomy – people don’t prepare or protect themselves against the good times.

But problems do give rise to opportunities. For example, as central banks have raised interest rates to tackle inflation expensive goods such as cars, that are often bought with borrowed money, have in effect become more expensive. However, manufacturers will most likely lower their prices to help kickstart demand, which provides an opportunity for those with savings to pay less for high value goods.

Trends

Crypto currency

Crypto currencies barely left the headlines in 2022. They had a fraught year, which ended especially badly as further chinks in the armour of the crypto world were uncovered when one of the largest exchange platforms went bust. Turbulence is, and should be, expected when putting your money into an unregulated and highly speculative area like crypto currency. But have the latest issues finally stopped crypto operating in its current format? There are other factors that haven’t made it into mainstream discussion yet, for example the staggering amount of energy that crypto currency uses. Expect further issues as the bumpy crypto ride continues.

Hydrogen

Hydrogen as a sustainable energy source has been in and out of popularity for years, with potential that truly excites investors. Car manufacturers spent billions chasing and missing the hydrogen energy dream decades ago. But now it is back and seems different. With the pressure on for clean fuel that can be made from various energy sources, and companies desperate to reduce carbon emissions to meet targets, the need has never been greater. There is also new science changing the approach to hydrogen capture and use. 2023 should answer whether we will finally enter the Hydrogen Age.

2023 is no doubt going to be another interesting year of ups and downs and I will be keeping a close eye on it as we go, so check back here for more commentary and reflection throughout the year.

By Roy Coulson, Attivo Head of Proposition

Please note for this weekly summary, we focus on the major indices within the financial markets such as the FTSE 100 (UK) and the Dow Jones and NASDAQ (US) to provide a factual account of what has happened within a certain index. Performance figures quoted are factual from the previous week’s trading and this summary is for commentary purposes only.

The performance of these indices is not a representation of an individual fund or portfolio. Past performance is no guarantee of future returns. The value of your investment can go down as well as up. You could get back less than you originally invested.