Investors have a notoriously bad track record of predicting financial markets
Many economic data points have already trended significantly lower, which will start to feed through to the official inflation data over the next 12 months. Additionally, the high inflation data will begin to fall out of the tail during the middle of 2023.
We believe the Fed will pivot during 2023 to avoid inflicting unnecessary punishment on the economy. This will be positive for risk assets, specifically stocks, and markets will likely recoup some of the ground they lost in 2022. The downsizing by some tech companies, including Meta Platforms, which cut its staff contingent by 30%, is spurred by the economic slowdown. Alphabet has doubled its staff complement over the last few years and has been reluctant to reduce staff numbers. Its hand may now be forced. This trend will initially stabilise profits and then put the mega-cap technology companies back on a growth trajectory.
Recent events such as the Ukrainian invasion and the Covid 19 pandemic show how unexpected events can quickly change the investment landscape. By their very nature it is difficult to forecast these events, but if we gaze into our crystal ball, the next crisis may originate from the following geopolitical events:
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