Future Proof recently hosted our first-ever digital event, with many more to come! I was joined by my co-host Barry Ritholtz and two special guests, Marta Norton, the CIO of Americas for Morningstar, and Jay Pelosky of TWP, to take a closer look at the macro environment for 2023.
Why this time is differnt
Is It Really Different This Time? The Short Answer: It Is.
We all agreed that 2023 is, in fact, shaping up to be very different! Most major banks and market experts predicted a dire year, but those predictions have been ripped up, thrown out, and replaced with new ones… and we’re only eight weeks in!
Our guest selection was on point (humblebrag), as both Jay and Marta had strong beliefs and opinions that 2023 is going to be like nothing we’ve seen before. They agreed that we should be looking beyond our borders to overcome a traditional home country bias and to take advantage of what could be a secular change if the U.S. underperforms on a go-forward basis.
Jay quickly pointed out that the headwinds of 2022 will become the tailwinds of 2023. Policy changes, such as China removing their zero COVID policy, the reduction in energy prices in Europe, and the reduction in the pace of rate hikes in the US, are all factors that weigh on the performance of the markets in 2022. Beyond that, Marta pointed to the war in Ukraine as an additional factor in the market sell-off of 2022.
Jay and Marta were optimists seeing pockets of opportunity throughout the global economy, pointing to areas like Germany, China, and even pockets within big tech. There were concerns that markets could get ahead of themselves and volatility could stick around for some time, but these valuations have improved.
It wouldn’t be a conversation about the markets without touching on the Fed and inflation! We all agreed that the Fed surprised investors by being more aggressive in 2022. The big question for 2023 now is how will the Fed act. Will they continue to hike or turn more dovish? One thing that surprised me was they did not see rate cuts, which could be a headwind for US markets.
The conversation continued with the topic of the weak US dollar and how the weaker dollar typically creates an environment for non-US markets to outperform. Areas like emerging markets and non-US developed countries are two that they liked and will continue to look at.
We wrapped up our episode with an exciting speed round, where we got Jay’s opinion on climate change and how he believes there is an upside to it, and that it’s an area investors should be keeping an eye on. Marta then quickly pointed out that climate change investments do not mean they should throw out the traditional energy companies, where she believes there is an opportunity as well. The group was less positive when it came to healthcare but did see some opportunity for cybersecurity, with Barry even cracking a joke that he is for cybersecurity as something we should all have.
And that’s a wrap! We’re already excited about the next episode on Thursday, March 16 at 12PM PST, where we will look at the impacts of behavioral finance and how advisors can use it to prevent their clients from making bad mistakes. CFP® professionals can receive CE credit for attending.