2023 investment outlook

Globally: Global growth is expected to weaken in 2023

Inflation coming down but remains above central bank targets

Global monetary policy tightening to peak in the first half of 2023

Looking into 2023, we are reminded that over the last century, no bear market linked to a recession has bottomed before the start of the recession. We are hopeful that the easing inflation and eventual US Fed pivot, along with the weaker dollar, will bode well for global and emerging market assets. Also, the emerging market assets are constructive in both absolute terms and relative to developed markets. Furthermore, China’s zero-Covid policy is likely to be largely removed by the summer of 2023, which will positively support emerging stocks and commodities. China’s reopening will spur world economic growth and at a minimum will help mitigate the recession fears that have negatively impacted global equities in the second half of 2022.

As coronavirus outbreaks, tighter financial conditions, and unending geopolitical turmoil continue to negatively impact the macro backdrop we expect the volatility in the financial markets to linger over the medium term. However, asset allocation should gradually add risk from Q1 2023 as central banks are closer to the interest rates peak. Table 1 unpacks our scenario analysis for the year 2023.

Overall, we believe this year presents a series of meaningful opportunities for investors, guided by the relevant market precedents. Thus in 2023, in our view, markets will lead the global economic recovery expected in 2024.

Locally:

Both external and internal headwinds will weigh on domestic growth

South African inflation has peaked and will continue to ease in 2023

Eskom’s debt and rising public wage bill pose risks to the fiscal consolidation path

SARB’s interest rate is expected to peak in the first quarter of the year at 7.25%