Outlook for the future

In investing, it is important to monitor not only the development of specific instruments, but also all external factors that have an impact on price development. What lies ahead in the next period and are we even prepared for the future correctly?

Rising interest rates and a milder recession in the US

Among investors, one of the most important topics is the direction in which the US economy will develop. Over the last year, the topic of rising interest rates and high inflation has resonated not only in the US. At its last meeting, the Fed raised interest rates by 75 basis points to a target rate of 3.75% to 4%. The hikes will continue and will probably go higher than originally thought. Record inflation will drive interest rates perhaps as high as 5.5%, which is higher than investors expected. [1]

The amount of interest rate hikes by the Fed over the past 5 years. (Source: Tradingeconomics)

The forecasts are relentless, predicting a slowdown in gross domestic product growth, but on the other hand, the US could be better off than Europe and its economy could avoid a recession in 2023. [2] A strong domestic labour market and the potential for cooperation with the Asian region will help them to do so. It is therefore possible that the US will be able to reduce inflation by at least one per cent during 2023.

The slump in the housing market

Hopes that credit will be available to everyone in the EU in the future have fallen rapidly and are at their lowest level since 2012. There is also increasing scepticism that capital coming into Europe from every part of the world will be sufficient. We can already see a negative trend in the UK. There are reports coming out of England that confirm that the property market there could be on the verge of a significant downturn. Next year we could see up to a 30% fall in house prices, with some market observers warning of price falls of up to 30%. [3] The number of new home buyers in the UK during October fell to its lowest level since the 2008 financial crisis.

Although conditions are not the same in all European countries, it is likely that Britain will be the springboard for a downward trend in property values across the EU. It is possible that the sharp rise in interest rates and falling prices will bring an end to the 13-year boom in the UK housing market, which in turn will cause property prices to fall not only in the UK but across the European region. [4] Globally, the EU will see a deterioration in the overall investment and development outlook over the course of the year. [5]

A greener planet

Another theme that will be prominent during 2023 is the fight for climate change and, in the wake of this, higher investment in green energy. The initial impetus comes from President Biden and Chinese President Xi Jinping. The two leaders have agreed to continue working together to combat climate change. This step is very important, because these two countries are huge polluters of the environment.

It is the United States and China that are the two powers that should invest more in green energy. So companies that emphasise this element may have an advantage in 2023 and beyond. Investors could also be inclined to invest with nature conservation in the coming year. [6] The US is the latest to unveil its energy transition plan, which aims to phase out coal in favour of clean energy sources. China too will follow the path of increasing investment in green energy. The trend towards green energy and investment in this sector will increase in the coming years, and not only in these two countries.

[1,2,3,4,5,6] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or on the current economic environment, which may change. Such statements are not guarantees of future performance. They involve risks and other uncertainties that are difficult to predict. Results may differ materially from those expressed or implied by any forward-looking statements.