Let’s gear up for 2023! We see plenty of opportunities. Here a few which we consider as having a high-return probability.
1. Inflation to stay stubbornly high
In 2022, the high level of inflation reset much of the asset values across many asset classes. Our day-to-day shopping bag, ranging from the gas pump and groceries to services, became on average about 10% more expensive. In some regions, the figure is a stumbling a notch higher as the price increase was augmented by the strong USD.
The general consensus is the Central Banks will start lowering interest rates by 2024. While interest rates may hover lower, we would expect the rate of inflation to decrease only over time. That suggests that Inflation Protected Securities may remain a popular way of going forward for short-term and risk-averse investors.
2. The bear market is not done yet
Markets are upside-down ever since February/March 2020. Markets recovered swiftly from the crash in February/March 2020; various subsidies and grants propelled e-commerce opportunities, work from home, and social media stock to new highs, while at the same time old-economy stocks were left high and dry. The 2nd bear market, in 2022, has corrected these excesses, and value stocks have made a great come back.
While markets are out of the bear market territory, we believe that a final wash-out is still come. This renewed correction will bring valuable opportunities for long-term investors. While fast-asset rotation and a passive allocation was key in the past, we believe that a selective buy and hold of stocks from sectors like technology, robotics, e-commerce, and luxury will hold true for 2023.
Improving investor sentiment will likely be tied to easing inflation, so the year ahead could prove tricky for traditional value investors. While applying a “buy low and trade” mantra might be opportunistic, we believe that a buy-and-hold will be more rewarding. Watch out for these luxury companies: https://www.ix-7.ch/Community/Blog.aspx?blogid=16249&title=Highend-Luxury-companyies
3. Consider Structured Solutions
For traditional investors this might sound like a contrarian investment advice—but we believe it is not!
During the last few years, structured solutions have made their way into every retail investor’s portfolio. In 2022, most of them have lost considerable amounts of funds with these instruments. But, given the present market distortion, 2023 holds the promise for equity-based structured solutions finally being capital guaranteed!
No matter your net worth, risk tolerance, or time horizon, your portfolio should include an increased allocation to capital guaranteed equity solutions. These structures are resulting from the combination market neutral and dispersion strategies and make equity-based investment opportunities attractive, irrelevant of the risk profile. Ask for our solution.
4. Credit is still sexy
We agree, fixed-income opportunities in the field of high yield are not to everyone’s taste, nor is credit. Yet, compared to traditional fixed-income opportunities, we believe that prime credit, with a 3 to 5 year, is a valid opportunity. Why? Corporations are cash-rich, balance sheets are sound, and while GDP is to be lower, companies exposed to the IG Credit segment offer valuable yield pick-up compared to the traditional fixed income.
5. Watch out for restructuring opportunities
As bad and as opportunistic as it may sound, companies are restructuring, and there are some benefits for investors. In recent months, numerous companies in the technology sector have made redundant several tens of thousands of workers across the globe. The most well-known companies include Meta, Amazon, Lyft, Twitter, and more start-up names le Redfin, Opendoor, and Robinhood amongst others. Slashing headcount is resulting in less fixed costs. Not all of the companies are cash strapped, and sales are not going back to zero at Amazon. This means that there is a great chance for them to be in a better position in 12-months’ time!
6. Crypto
The implosion of FTX and the ramifications this insolvency brings with it were probably the much-required events the crypto segment needed! We believe that regulation and supervision will be reinforced, and ultimately, there will be a few winners. At the same time, since the regulation and the supervision will be tough to meet, another series of liquidations and mergers will happen. If you are crypto investor, make sure that you pony up with the right one!
Our view on crypto is without a doubt clear. The nominal value of crypto is zero and governance is lacking. We are keen to go along with any CBDC opportunities. Interested investors can listen to our podcast and then read the subsequent articles here:
Podcast: https://www.ix-7.com/cbdc-central-bank-digital-currency/
Blog: https://www.ix-7.ch/Community/Blog.aspx?blogid=16257&title=CryptoWinter–What-is-the-real-value-of-crypto
7. Energy and Resources
With the aim to engage into the energy transition, various governments have announced a number of trademark deals. Most of them aim at reducing energy dependence from fossil resources. Fine, point taken! Yet, while reducing fossil-based resources, we increase our dependence on rare earth metals and semi-conductors that allow the manufacturing and management of battery-based energy! Remember, 70% of REE are mined and calibrated in China.
We believe that battery-based energy solutions are a transition towards hydrogen-based solutions. Because the technology is not yet ready, we continue to invest in traditional energy resources; as big dividend players, they still have their place in traditional asset allocations. Article of interest: https://www.ix-7.ch/Community/Blog.aspx?blogid=16437&title=Europes-energy-independence
8. Industrial Real Estate
One might think that the property market is ready for a big correction and that it will take time for the segment to recover. That might be true for some segments like the office rental market which has been shaken up over the last two years.
Yet, we see some valuable opportunities in the segment of industrial properties. These properties are normally leased for a multi-year period, they are located at key highway interconnections, and they are close to other infrastructure and service providers. Therefore, it is truly complex for a well-established company to find an alternative location with better benefits.
Typically, we like companies which have exposure to telecom towers, e-commerce opportunities and data-centers, and pharma testing centers. Investors can find out more about our preferences in this article: https://www.ix-7.ch/Community/Blog.aspx?blogid=16290&title=Margin-Call
9. Payment solutions
We believe in the future! Price-sensitive economies make consumers more value-driven, which by definition would suggest that they spend less but better. Recent data suggests, however, that consumers are not spending less. On the contrary, they make an ever-greater use of POS that is interconnected to one or the other key credit card operators.
Credit card service providers are one of our top picks for 2023. They have suffered from numerous set-backs between 2021 and 2022. Yet, they have an almost absolute pricing power. At the same time, the entry threshold for newcomers is very high; it takes years to build and develop a solid network of distributors. We, as credit card holders, remain relatively loyal to the credit card company. So all the benefit are for the investors. Investors wishing to get more familiar with the subject may read this article: https://www.ix-7.ch/Community/Blog.aspx?blogid=16278&title=Block