Sankore Global Investments, a leading investment management firm releases it’s Annual Outlook for 2023 with the theme : Taking the bull by the horns. Sankore, which also just rebranded its image and logo, continues to fulfil its pursuit of building timeless wealth for it’s clients. An in-depth analysis covering the global and local outlook for the year 2023.
Global and Local Outlook
Overview
We expect Global GDP growth to slow albeit mildly in 2023 as countries engage in restrictive monetary policy to curb inflation. Our estimated base case growth level for global GDP is 3%. In Nigeria, we expect economic growth to rebound marginally to 3.5%. The 2023 elections will be the most dominant theme whilst the implementation of key fiscal and monetary policy takes a back seat.
China Reopens
While the rest of the world moved on from Covid midway through 2021, China seems to have remained stuck with the virus as it implemented sweeping restrictions over large swathes of the country in a bid to limit the spread of the virus. This move has created a significant headwind to Chinese economic growth (Q1 2022 GDP came in at 4.8% its lowest in more than a decade) as much of the productive parts of the country remained shut for the better part of 2022. However social unrest reminiscent of the Tiananmen Square protests forced Beijing to abruptly end the lockdowns late last year.
As China lifts its restrictive zero Covid policy which hampered economic activity and supply chains, we expect a rebound in its GDP growth and a rise in the demand for commodities which could hurt the Central bank’s fight against inflation.
Global Slowdown
In ensuring its citizens were shielded from the debilitating economic impact of the covid pandemic, central banks world over embarked on their most aggressive, accommodative monetary policy stance in over a decade. This created a wall of money that spurred demand greatly. However, with supply chains scuttled, red-hot demand ensured that prices went on an upward trajectory that pushed inflation to its highest levels in more than 40 years. In a bid to combat inflation, Central banks have embarked on an aggressive reversal of their ultra-loose monetary policy stance.
The impact of the most aggressive monetary tightening in the last two decades is likely to create an economic slowdown in 2023.
Market Recovery
A major unintended consequence of the aggressively loose monetary policy implemented by the US Fed in the wake of the covid-19 pandemic was the froth created in risk assets, as a wall of money flowed into equities, creating a bubble that saw the S&P rise to its highest level on record, posting a gain of 103% between march 2020 and December 2021. The dialing back of the loose monetary policy by the Fed essentially burst the bubble in 2022 as the S&P lost 19%.
However, risk assets are poised for a bounce in 2023 following their worst performance in over a decade as a broad variety of names trades at a good value.
US vs China
The political and ideological divergence between China and the West, particularly US, has fueled prominent rivalries in industrial competition, geopolitics, and military prowess. A cold war is brewing, and the US now faces a more formidable challenger in China than the USSR.
Geopolitical Tension
There remains several geopolitical hotspots that could shape trade and economic activity in 2023. The Russia-Ukraine crisis continues to stoke inflation and uncertainty and has brought to the fore the possibility of a move on Taiwan by China.
Regulation of Tech
The spectacular unraveling of the crypto world in 2022 has increasingly highlighted the need for more appropriate regulation in the Techworld. We expect this multiyear theme will continue in 2023.
“Be FEARFUL when others are GREEDY and be GREEDY when others are FEARFUL”
– Warren Buffett
Investing in 2023:
TAKING THE BULL BY ITS HORNS
INVESTMENT STRATEGY
We foresee some more volatility in 2023 albeit with opportunities for growth. A lot of expertise is required to make the most of these opportunities as we believe market moves would be akin to riding a bucking bull.
The 5 key steps to successfully riding a bucking bull apply quite well for investing at this time:
ENSURE CAPACITY
Investments made now should be of funds that can afford to ride through the volatility of the next year. Best to stay liquid for necessities.
GET THE RIGHT ADVICE
The increased volatility expected will require some handholding
OPTIMAL POSITIONING
This year, diversification and proper allocations are particularly important.
STRONG PROTECTION
This year, investments with strong income and cash flow make the most sense. Also hedge funds or structured products offering market-neutral strategies that hedge against risk and volatility
EMOTIONAL STABILITY
Be calm and hold on tight, it will be a bumpy ride!
Sankore provides tailor-made fund management, real estate, and investment technology services, to a range of clients including individuals and corporations. Visit sankore.com for more insights.
