Global investment outlook for 2023: Looking for the silver lining – Yahoo Finance
Navigating markets in 2023 will require more frequent portfolio changes amid a grim investment outlook. Photo: AP
As the new year approaches, economic cheer is scarce on the ground amid a darkening economic outlook marked by recession and persistent inflation.
Inflation is high, interest rates continue to climb, growth expectations tumble, geopolitical tensions like the war in Ukraine and past fiscal policy errors like the UK’s mini-budget continue to weigh on financial markets.
Investors will have to remain cautions and look for the silver linings in 2023 as the world economy slows down.
A recession foretold
A painful squeeze is already under way for companies and households as the UK’s independent Office for Budget Responsibility (OBR) offered a bleak outlook, projecting a 1.4% gross domestic product (GDP) contraction in 2023.
An OECD forecast said that only Russia would suffer a bigger economic contraction than the UK in 2023 among the G-20 leading developed and developing economies.
UK GDP contracted by 0.4% between the fourth quarter of 2019 and the third quarter of 2022.
Read more: 2022: Year in review
The Bank of England warned that the UK is facing its longest recession since records began, with the economic downturn expected to extend well into 2024.
Companies have felt it in their balance sheets, with London-listed firms issuing a total of 86 profit warnings, more than in any third quarter since 2008, according consultancy EY.
The rise in warnings was driven by an increase in the number of warnings from consumer-facing companies, which rose almost three-fold year-on-year. The report revealed that 57% of warnings during the third quarter cited rising costs, while 23% were prompted by labour market issues.
Over 40% of FTSE (^FTSE) retailers and over 60% of the FTSE Personal Care, Drug and Grocery Stores sector issued a profit warning in the last 12 months.
“Central bankers won’t ride to the rescue when growth slows in this new regime, contrary to what investors have come to expect. They are deliberately causing recessions by overtightening policy to try to rein in inflation,” BlackRock said.
Read more: UK in recession until end of 2023, CBI warns
That makes recession foretold, according to the markets.
“We now expect the euro zone and the UK to have entered a recession in Q4 2022, and China to be in a growth recession. These economies should bottom out by mid-2023 and begin a weak, tentative recovery – a scenario that rests on the crucial assumption that the …….